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FREE  BANKING 


FREE  BANKING 


A  NATURAL  RIGHT 


BY 

JAMES  A.  B.  DILWORTH 


MDCCCXCVII 

CONTINENTAL   PUBLISHING  CO. 

NEW  YORK  AND  LONDON 


^A?'' 


GF/Vffiyit 


Copyright,  1897,  by 
CONTINENTAL  PUBLISHING  CO. 


PREFACE. 


To  the  critical  reader  of  history  it  is  appar- 
ent that,  as  a  nation  advances  in  civiUzation 
and  material  wealth,  the  increase  of  its  pauper 
and  criminal  class  is  at  a  much  greater  ratio 
than  its  population,  and  that  poverty  pro- 
motes crime.  If  this  were  the  result  of  a  uni- 
versal law,  the  ratio  of  pauperism  and  crime 
to  self-sustaining  population  would  be  equal 
in  communities  of  equal  population,  enlight- 
enment, and  wealth. 

Such,  however,  is  not  the  case.  Nor  is  it  a 
universal  law,  nor,  indeed,  a  law  at  all  that,  as 
communities  increase  in  intelligence,  material 
wealth,  and  in  the  development  of  the  arts, 
poverty  and  crime  must  also  increase. 

In  communities  where  natural  opportuni- 
ties, properly  utilized,  furnish  in  abundance 
the  necessities  and  comforts  of  life  for  all,  the 
existence  of  poverty  and  crime  is  not  the  re- 
sult of  a  universal  law;  it  is  because  of  a  dis- 
regard of  a  natural  law. 

It  was  the  hope  that  I  might  do  something 

5 

1 ORO^n 


6  PREFACE. 

to  imbed  this  truth  in  the  minds  of  some  of 
my  fellow-men  that  caused  this  monograph 
to  be  written. 

The  particular  lesson  I  wish  to  teach  is 
that  the  monopolization  of  money  by  nations 
or  by  great  corporations,  like  that  of  the  Bank 
of  England,  is  a  disregard  of  natural  rights,  a 
fruitful  source  of  injustice,  a  limitation  of  free- 
dom to  opportunity,  and  is  most  potent  in 
developing  poverty  and  crime.  I  seek  to 
prove,  furthermore,  that  money  is  not  an 
essential  concomitant  of  commerce,  but  that 
credit  is,  and  that  civiHzation  can  more  readily 
dispense  with  legal-tender  money  than  with 
credit  money. 

This  is  no  new  thought  to  me.  More  than 
thirty  years  ago  I  published  my  first  article 
on  this  subject,  and  the  years  of  thought  since 
then  bestowed  upon  the  theme  have  served 
only  to  strengthen  my  belief  in  the  correct- 
ness of  the  theory;  namely,  that  the  best 
money  to  promote  the  welfare  of  communities 
is  money  of  that  character  that  makes  it  ac- 
ceptable to  those  of  the  community  for  whose 
interest  it  is  issued,  and  is  to  them  of  value 
equal  to  the  safest  money,  yet  of  so  httle  in- 
trinsic value  that  it  will  not  be  attracted  from 
the  community  for  whose  interest  it  was 
issued. 


PREFACE.  7 

I  herein  propose  monetary  methods 
founded  on  the  Golden  Rule — just  to  all,  and 
unjust  to  none.  These,  put  into  practice,  will 
give  to  each  community  in  the  United  States 
where  natural  privileges  abound  and  idle 
labor  exists,  opportunities  equal  to  those  of 
other  communities  of  our  country. 

It  will  prevent  innocent  communities  from 
being  disastrously  affected  by  the  inequalities 
or  the  calamities  of  others;  by  it,  financially 
weak  communities  could  not  be  oppressed  by 
financially  strong  communities.  Because  of 
it,  great  cities  cannot  grow  and  prosper  at 
the  expense  of  smaller  cities  and  those  of 
agrarian  interests. 

The  Author. 


ERRATA. 

Page  41.     Line  28.     Read  "limitation,"  not  "imitation." 

Page  49.     Line  19.     Read  "could  fix,"  not  "would  fix." 

Page  55.  Lines  2  and  3  should  read  :  "  Of  its  citizens  for 
the  law  and  in  their  belief  in  the  justice  of 
law.     So  long  as  law,"  etc. 

Page  62.  Line  4.  Read  "  arbitrary  laws,"  not  "  artificial 
laws." 

Page  82.  Line  I2,  Read  "  restriction  of,"  not  "  exer- 
cise of," 

Page  98.  Line  17  is  a  repetition  of  line  13  and  should  be 
omitted,  and  instead  read  "national  bank 
notes,  bonds,  stamp." 

Page  139.  Ivine  15.  Read  "apparently,"  not  "  on  the 
other  hand." 

Page  182.  Line  29,  Read  "  being  established,"  not 
"  established." 

Page  196.  Lines  2,  3,  4,  5  and  6,  should  read  "  activity, 
under  the  system  described,  the  accumu- 
lation of  wealth  has  been  reserved  for  the 
people  of  the  communities  which  produced  it, 
and  distributed  as  fairly  as  under  any  system 
of  economy  yet  devised." 


FREE  BANKING. 


CHAPTER  I. 

The  Presidential  election  of  1896  teaches  in 
an  emphatic  and  unmistakable  manner  that 
an  abnormally  large  part  of  the  American 
voters  are  thoroughly  discontented  with  the 
monetary  system  of  our  country.  Upward  of 
forty-six  per  cent,  of  those  voters  emphasized 
their  discontent  by  voting  for  a  radical  and 
extremely  experimental  departure  from  our 
established  custom  of  monetary  manage- 
ment, notwithstanding  the  fact  that  every  dol- 
lar issued  by  our  Government — whether  of 
paper,  silver,  or  gold — is  worth,  and  is  readily 
convertible  into,  24.8  grains  of  gold,  900  fine- 
ness, and  equal  to  the  most  reliable  and  staple 
currency  of  the  world.  Upward  of  6,500,000 
of  our  people,  as  intelligent,  patriotic,  and 
honest  as  the  7,000,000  who  voted  for  Mr. 
McKinley,  gave  their  consent  to  our  Govern- 
ment to  open  the  mints  of  the  United  States 
to  the  free  and  unlimited  coinage  of  silver 
into   silver  dollars  of  412^  grains  of   silver, 


10  FREE  BANKING. 

900  fineness,  and  to  make  such  silver  dollar 
legal  tender  for  all  public  and  all  private 
debts. 

Nearly  all  of  these  6,500,000  of  voters  knew 
that  the  silver  bullion  in  the  silver  dollar  was 
worth  in  the  markets  of  the  world  only  half 
as  much  as  the  gold  bullion  contained  in  a 
gold  dollar. 

To  assume  that  nearly  all  of  those  citizens 
who  voted  for  Mr.  Bryan  did  not  know  the 
relative  value  of  the  metals  contained  in  the 
two  coins,  is  a  reflection  on  the  intelligence  of 
the  American  voter  and  on  the  system  of  edu- 
cation in  the  United  States.  This  cannot  suc- 
cessfully be  maintained.  To  assume  that  a 
great  proportion  of  those  6,500,000  of  voters 
is  dishonest,  and  that  when  giving  their 
votes  in  support  of  free  coinage  of  silver  they 
sought  to  escape  financial  responsibilities,  is 
even  a  greater  libel  on  the  fair  name  of  our 
country,  as  well  as  on  the  ethical  development 
of  republican  institutions. 

Upon  many  men  has  been  bestowed  the 
gift  of  beautiful  speech,  and  the  power  to  array 
in  charming  language  unreasonable  and  illogi- 
cal thought.  And  too  often  also  for  the  best 
interest  of  the  whole  people  has  this  gift  been 
used  to  charm  the  ear,  to  disturb  thought,  and 
to  stagnate  reasoning.  The  power  of  elo- 
quence, too,  has  probably  never  been  used 


FREE  BANKING.  II 

with  greater  disadvantage  to  the  people  of  the 
United  States  than  during  the  last  Presidential 
campaign. 

Mr.  Bryan,  the  nominee  of  the  Democratic 
party,  possesses  a  power  to  arrange  and 
emphasize  words  to  charm  the  ear  that  but 
few  other  orators  possess;  and  throughout  the 
late  campaign  that  great  gift  was  aided  also  by 
great  personal  magnetism  and  severe  physical 
endurance. 

Few  of  our  public  men  have  displayed 
more  courage — none,  perhaps,  as  much 
energy  and  endurance — in  espousing  a  cause 
as  that  displayed  by  Mr.  Bryan  in  his  cam- 
paign for  *'  Free  Coinage  of  Silver."  His  was 
the  energy  of  the  enthusiast.  Mere  personal 
ambition  could  not  have  prompted  such  fervor 
of  speech,  such  intensity  of  action.  Like 
Peter  the  Hermit,  the  cause  he  championed  he 
believed  to  be  just;  that  its  triumph  would 
emancipate  millions  from  a  bondage  more 
galling  than  that  of  slavery,  and  would  destroy 
a  power  that,  if  not  soon  checked,  would  rele- 
gate the  agricultural  masses  of  our  country  to 
poverty  more  terrible,  to  ignorance  more 
dense,  than  that  of  Russian  serfdom. 

Had  his  cause  been  triumphant,  it  might 
not  have  been  so  disastrous  to  his  followers 
as  was  the  cause  of  those  who  followed  the 
Hermit,  whose  bones  now  form  a  part  of  the 


12  FREE  BANKING, 

soil  from  the  sea-washed  coast  of  Europe  to 
the  banks  of  the  Bosphorus. 

It  is  difficult  to  see  how  any  lasting  bene- 
fit could  come  to  a  people  from  changing  their 
money  basis  from  gold  to  silver,  or  from 
gold  to  silver  and  gold,  unless  the  method  to 
provide  mediums  for  exchange  was  radically 
changed.  Mr.  Bryan's  fervent  and  distract- 
ing eloquence  is  largely  responsible  for  the 
failure  of  those  millions — discontented  with 
the  financial  condition  of  the  country — to  go 
deeper  into  the  real  cause  of  the  discontent. 
To  the  Democratic  campaign  he  gave  the  cue; 
and  a  flood-gate  of  eloquence  was  opened, 
from  which  outswept  entrancing  and  distract- 
ing appeals  to  the  people.  All  were  centered 
upon  the  one  financial  remedy — free  coinage 
of  silver.  Yet  the  very  arguments  used  to 
win  voters  to  the  free  coinage  of  silver,  if  ex- 
tended to  a  logical  conclusion,  demonstrated 
that  free  coinage  was  not  the  remedy  for 
existing  evils. 

Mr.  McKinley,  not  so  eloquent  in  speech, 
probably,  but  more  subtle  perhaps  in  stage 
effect,  appealed  to  the  emotional  rather  than 
the  reasoning  nature  of  men.  In  this  respect 
he  also  gave  the  cue  to  the  great  army  of  ora- 
tors and  educators  who  espoused  the  cause  of 
"  Sound  Money "  and  the  single  standard. 
The  "Credit  of  the  Nation''  and  "Honest 


FREE  BANKING.  13 

Money  "  were  potent  factors  in  winning  voters 
for  Mr.  McKinley.  Even  "  Old  Glory  "  and 
"  Patriotism  "  were  honeyed  words  in  the  vo- 
cabulary of  the  Republican  orators. 

In  the  great  cities,  where  marble  and  granite 
palaces  are  the  homestead  of  many,  where 
rich  and  ornate  temples  cover  the  assembled 
worshipers,  many  preachers — doubtless  a 
number  of  them  sincere  in  their  belief — 
turned  the  sacred  desk  into  a  political  ros- 
trum, and,  as  a  solemn  duty  of  all  who  serve 
the  cause  of  Christ,  preached  a  new  religious 
doctrine  of  ''  Sound  Money,"  '*  The  Nation's 
Credit,"  *'  Old  Glory,"  "  Patriotism,"  and 
"  McKinley." 

In  communities  where  the  homesteads  con- 
sist of  a  few  rooms  made  habitable  by  boards, 
lime,  and  sand,  shutting  out  the  breeze  and 
cold  blasts,  and  where  pious  and  honest  hu- 
manity worships  in  temples  not  made  of 
stone,  not  ornate  with  gems  of  art,  many  other 
brethren  preached  that  the  money-changers 
of  Jerusalem  were  the  special  aversion  of  the 
Master,  and  that  the  establishment  of  the 
single  gold  standard  by  the  great  nations  of 
the  world  was  in  the  interest  of  the  money- 
changers, and  consequently  not  justified  by 
the  Master.  Each  of  these  two  classes  of 
spiritual  leaders  preached,  doubtless,  that 
which   he   believed   should   be   taught   as   a 


14  FREE  BANKING. 

cardinal  truth.  That  one  or  the  other  of  these 
classes  could  not  be  right  in  their  belief,  it  is 
evident.  It  is  indeed  highly  probable  that 
each  was  wrong.  Those  who  believed  in  the 
righteousness  of  the  cause,  and  who  preached 
it  with  more  or  less  vigor,  were  honest  in  pur- 
pose, sincerely  fulfilling  the  solemn  obliga- 
tion they  took  upon  themselves  when  they 
entered  the  ministry. 

But  those  among  them  who  introduced  the 
discussion  of  the  "  money  question "  into 
their  church  work,  and  from  the  pulpit  dis- 
cussed "  Honest  Money  "  and  '*  Patriotism," 
**  The  Masses  and  the  Classes,"  and  "  Crime  of 
'73,"  for  the  purpose  of  touching  a  chord  in 
harmony  with  the  views  of  their  congregation, 
are  the  ulcers  of  religion,  the  pests  of  society, 
an  affliction  to  mankind.  The  generation  to 
follow  will  pity  these  ignorant  zealots  of  the 
last  campaign,  and  will  hold  in  supremie  con- 
tempt those  who  used  the  sacred  desk  for 
pride  and  gain. 

The  geographical  division  of  the  country 
into  "  Sound  Money  "  and  **  Free  Silver  Coin- 
age "  communities  should,  of  itself,  be  sufB- 
cient  to  raise  a  doubt  in  all  thoughtful  minds 
as  to  the  correctness  of  the  views  of  either  of 
the  great  parties  on  the  question  of  money. 

Following  the  line  along  the  southern 
boundary  of  Delaware  to  the  mouth  of  the 


Potomac  River;  follov^iigjthe  cgan^  of  that 
river  to  the  Falls  of  the  Potomac,  and  then 
westward  to  Kentucky,  and  along  the  Ohio 
River  to  the  Mississippi;  up  that  "  Father  of 
Waters  "  to  the  north  boundary  of  Missouri, 
and  then  westward  to  the  crest  of  the  Sierras; 
along  these  mountains  to  Mexico;  then  follow- 
ing the  Mexican  line  to  the  Gulf,  and  along 
the  coast  back  to  the  Delaware  boundary, 
comprises  a  territory  of  gigantic  extent,  popu- 
lated more  or  less  densely  by  a  people  of  much 
intelligence,  great  energy,  and  of  enormous 
capability.  By  a  great  majority  of  the  voters 
of  that  immense  territory  the  free  coinage  of 
silver,  at  a  rate  of  i6  to  i  of  gold,  was  de- 
manded as  a  measure  of  relief  from  that 
which  they  doubtless  believed  to  be  the  op- 
pressive system  of  money,  the  basis  of  which 
is  gold. 

It  displays  very  little  intelligence,  less  love 
of  country,  and  no  sense  of  justice  at  all,  to 
denounce  the  majority  of  the  people  of  that 
great  territory  as  ignorant,  unpatriotic,  or  dis- 
honest. Nor  can  their  discontent  be  reme- 
died by  such  criticism.  For  this  discontent 
some  other  source  must  be  sought  than  that 
of  ignorance,  disloyalty,  or  dishonesty.  Tlie 
measure  of  their  intelligence — if  gauged  by 
the  mental  forces  of  those  who  met  them  in 
discussion  on  the  hustings,  in  the  forum,  or  in 


1 6  FREE  BANKING. 

the  press  of  the  country — does  not,  on  the  con- 
trary, disclose  great  ignorance. 

Let  the  storm  signal  of  the  nation's  danger 
be  hoisted,  and  in  responding  to  the  country's 
call  tO'  arms,  no  doubt  as  much  alacrity 
would  be  displayed  by  the  people  of  those 
States  that  gave  their  votes  to  Mr.  Bryan  as 
would  be  shown  by  those  States  that  gave 
their  votes  to  Mr.  McKinley.  And  measured 
by  the  standard  of  wealth,  they  would  no 
doubt  be  equally  responsive  to  the  Govern- 
ment call  for  financial  aid.  The  honest  and 
dishonest  proclivities  of  American  citizens  are 
not  marked  by  States,  nor  by  sections  of  the 
Republic. 

Assuming  that  States  vote  as  a  unit  in  Presi- 
dential elections,  40,000,000  of  the  people, 
worth  $47,390,000,000,  or  per  capita  of  about 
$1200,  gave  their  ratification  to  Mr.  McKinley 
in  support  of  the  existing  gold  standard,  and 
22,000,000  of  the  people,  worth  $16,680,000,- 
000,  or  per  capita  of  about  $750,  gave  their 
votes  to  Mr.  Bryan  and  to  a  free  and  un- 
limited coinage  of  silver  into  standard  dollars, 
the  bullion  value  of  which  at  the  time  was 
worth  only  about  half  as  much  as  the  worth 
of  the  bullion  in  the  gold  dollar. 

The  figures  given  above  are  presumably 
correct.  They  were  those  presented  recently 
by  a  great  New  York  daily  journal,  to  support 


FREE  BANKING.  1 7 

the  theory  that,  because  the  wealth  of  the 
country  was  so  largely  on  the  side  of  Mr.  Mc- 
Kinley  and  the  gold  standard,  it  was  the  in- 
telligence of  the  country  that  gave  its  support 
to  that  cause.  Well  may  the  Free  Silver 
Coinage  advocate  give  Dean  Swift's  retort  to 
a  similar  proposition :  "  God  shows  his  appre- 
ciation of  money  by  the  character  of  the  man 
he  bestows  it  upon." 

These  figures  prove  that  the  rich  and  afiflu- 
ent  communities  are  well  satisfied  with  the 
present  condition;  while,  on  the  other  hand, 
the  poverty-oppressed  and  struggling  com- 
munities are  discontented.  And  it  is  a  fair 
inference  that  the  present  conditions  afford 
the  affluent  all  the  opportunity  that  they  may 
reasonably  hope  to  possess  to  hold  on  to  their 
present  accumulations  and  to  increase  their 
stores  of  wealth.  It  is  equally  fair  also  to 
assume  that  existing  conditions  deny  to  the 
struggling  classes  a  fair  opportunity  to  main- 
tain themselves  in  comfort,  or  arouse  a  hope 
in  them  that  they  may  provide  themselves 
against  want,  when  age  incapacitates  them 
from  producing  for  themselves. 

Those  who  possess  large  fortunes,  who  con- 
trol the  finances  of  the  country,  and  largely 
expand  or  limit  its  credits,  as  their  hopes  or 
fears  control  them,  cannot  aflford  to  treat  with 
indifference,  much  less  contempt,  the  appeals 


1 8  FREE  BANKING. 

for  relief  from  fancied  or  real  oppression  that 
the  large  vote  given  to  Mr.  Bryan  seems  to 
plead  for;  no  matter  if  this  oppressed  con- 
dition be  real  or  imaginary;  no  matter  if  the 
cause  of  the  discontent  be  the  result  of  bad 
management  or  of  diseased  minds.  Whatever 
the  cause,  so  great  a  number  of  discontented 
is  a  menace  to  the  stability  of  government. 

How  to  reconcile  these  discontented  citizens 
of  our  country  is  a  problem  that  demands  the 
thoughtful  attention  of  every  lover  of  law  and 
order.  There  can  be  no  questioning  of  the 
fact  that  a  large  majority  of  American  citi- 
zens demand  that  order  must  be  maintained. 
This  sentiment  is  almost  unanimous.  Not 
only  do  they  demand  preservation  of  order  in 
all  communities,  but  they  insist  upon  it  to  the 
extent  even  that  if  the  law  stands  in  the  way 
of  its  immediate  enforcement,  the  law  must 
violently  for  a  time  be  brushed  aside.  It  is 
this  demand  for  order  that  prompts  lynching, 
and,  as  is  well  known,  causes  men  to  organize 
such  societies  as  Kuklux,  White  Caps,  and 
associations  of  that  character.  And  in  the 
judgment  of  the  masses  of  our  citizens,  the 
end  nearly  always  justifies  the  means,  if 
the  end  be  peace  and  quietude. 

The  assembling,  too,  of  men  to  hear  and 
discuss  principles  of  statecraft,  religious,  and 
other  social  problems,  is  encouraged  by  the 


FREE  BANKING.  19 

sentiment  of  our  people,  who  are  quick  to  re- 
sist any  infringement  on  that  right  unless  the 
belief  be  prevalent  that  such  assembling  of  the 
people  may  be  to  advance  a  theory  of  political 
science  that  will  lead  to  disorder.  In  case  of 
such  assembling  the  people  are  intolerant,  and 
in  their  criticism  of  the  Government  too  often 
are  severe  because  it  gives  too  much  con- 
sideration to  law,  and,  consequently,  being, 
in  their  belief,  too  lenient  in  its  treatment  of 
such  assemblings.  It  is  indeed  to  be  re- 
gretted that  so  great  a  number  of  the  citizens 
of  the  United  States  should  prove  themselves 
to  be  "  violent  people."  This  is  one  of  the 
potent  factors  of  American  temperament  that 
now  menace  the  stability  of  our  Government. 

It  will  be  impossible  to  maintain  the  present 
standard  of  education,  much  less  advance  it, 
if  freedom  of  thought  is  to  be  crushed.  Nor 
does  it  alone  require  Bastiles  and  Siberian 
mines  to  repress  it.  Social  ostracism  is  even 
more  potent  to  do  so  than  prison  walls  or 
Siberian  ice-wastes. 

The  growing  tendency  of  the  well-to-do 
citizens  of  the  United  States,  and  of  their  army 
of  satellites,  to  class  all  who  differ  with  them 
on  the  great  social  problems  as  anarchists  and 
socialists  is  much  to  be  lamented.  Doubtless 
only  a  small  proportion  of  those  who  so 
flippantly  use  those  terms  to  describe  their 


20  FREE  BANKING. 

neighbors  and  fellow-citizens  have  the  remot- 
est idea  of  what  anarchism  or  socialism  really 
means.  When  using  such  terms  they  wish 
to  be  offensive  only,  and  there  is  about  the 
same  amount  of  intelligence  displayed  when 
using  them,  or  less,  even,  than  by  those  per- 
sons who  describe  the  great  Adversary  as  a 
man  with  horse's  hoofs  and  bull's  horns,  who 
feasts  on  live  coals,  and  washes  them  down 
with  libations  of  liquid  sulphur  in  a  fiery  state. 

Men,  by  their  environment  left  free  to  think 
and  to  express  their  thoughts  to  their  fellow- 
men,  will  not  unite  in  concerted  action  on  any 
one  line  of  thought,  nor  worship  at  any  one 
shrine,  nor  be  bound  by  any  one  creed;  yet  if 
left  free  to  think  and  speak,  the  same  men 
will  unite  on  ethical  lines  along  highways  of 
justice  and  truth.  There  are  but  few  of  our 
countrymen  who,  convinced  that  those  princi- 
ples of  government  that  they  have  advocated 
are  not  calculated  to  increase  the  national  wel- 
fare, but,  on  the  contrary,  to  detract  from  it, 
but  what  will  quickly  abandon  the  advocacy 
of  those  principles.  The  number  of  citizens 
who  seek,  either  by  direct  or  subtle  means,  to 
impair  the  welfare  of  our  common  country  is 
so  infinitesimal  as  to  be  an  incalculable  factor 
in  the  nation's  affairs. 

On  the  contrary,  to  anyone  who  will  give 
a  thought  to  this  proposition,  the  wholesale 


FREE  BANKING,  21 

charges  of  dishonesty  and  disloyalty  against 
those  millions  of  our  people  who  opposed  the 
election  of  Mr.  McKinley,  must  appear  not 
only  absurd,  but  almost  criminal.  How  many 
of  those  who  so  delighted  to  speak  of  Mr. 
Bryan  as  an  insincere  seeker  after  fame  and 
fortune,  who  called  Governor  Altgeld  an 
anarchist,  Senators  Morgan  and  Jones  repudi- 
ationists,  and  Senators  Teller  and  Stewart 
plunderers,  have  ever  realized  the  extent  of 
the  degeneration  of  the  agriculturist's  hope 
since  i860? 

A  full  generation  has  passed  away  since 
then,  but  thousands  now  live  in  health  and 
vigor  whose  memory  carries  them  back  to 
years  even  before  i860.  They  well  remember 
the  joyous  expectancy  that  filled  the  souls 
of  the  young  couple  who  began  life  upon  a 
mortgaged  farm,  with  only  their  good  health 
and  energy,  a  few  horses,  cows,  fowls,  pigs,  and 
old  farming  utensils  as  capital.  Experience 
of  others  had  taught  them  that  only  a  lack  of 
health  and  an  unnatural  shortening  of  the  life 
of  the  farmer,  and  the  absence  of  sobriety  and 
energy  on  his  part,  would  prevent  them  from 
attaining  the  full  ownership  of  that  farm ;  that, 
in  fact,  free  from  all  detracting  incumbrances, 
with  many  improvements  that  would  add  to 
its  fertility  and  to  their  comforts,  they  would 
greatly  increase  its  market  value  should  they 


22  FREE  BANKING, 

desire  to  sell  it.  That  farm  was  to  them  what 
the  savings  banks  are  to  the  wage-earner. 
The  labor  they  expended  on  its  improve- 
ments only  increased  their  store  to  provide 
for  their  comforts  when  years  should  incapaci- 
tate them  from  further  productiveness.  It  was 
indeed  this  hope,  born  of  the  experiences  of 
their  fathers,  that  in  forty  years  turned  the  wild 
prairies  of  Ohio,  Illinois,  and  Indiana  into 
fertile  fields  rich  with  grain  and  grass.  It 
built  up  the  great  West  without  the  aid  of 
capitalists.  In  one  generation  it  established 
OH'  the  plains,  over  which  wild  beasts  and 
wilder  men  had  roamed,  a  territory  vast  and 
densely  populated  with  happy,  prosperous, 
and  hopeful  agriculturists. 

To  those  who  dwell  in  cities!  Does  the 
thought  ever  occur  that,  if  measured  by  the 
standard  of  gold  dollars,  scarcely  a  farm  in 
the  thirteen  original  States,  or  in  those  new 
States  created  solely  by  the  energy,  nerve,  and 
logical  hope  in  the  hearts  of  young  farmers, 
could  have  been  sold  for  as  much — the  im- 
provement being  equal — on  any  succeeding 
New  Year  as  on  a  preceding  year  since  the 
year  i860  unless  some  special  local  value  had 
been  given  to  it  by  a  new  industry  available  to 
only  the  few? 

Do  those  worthy  citizens  who  dwell  in 
towns  and  cities  and  deal  in  commodities  of 


FREE  BANKmC.  23 

the  farm,  who  have  grown  richer  year  by  year 
during  the  past  thirty-five  years,  and  who  have 
seen  that  real  estate  upon  which  they  trans- 
acted their  business  and  upon  which  they  Hve, 
increase  year  by  year  in  selhng  value,  realize 
what  would  be  the  probable  condition  of  their 
minds  had  they,  after  a  struggle  of  a  lifetime, 
reached  old  age,  or  an  age  of  crippled  energy, 
only  to  find  themselves  unprovided  for,  the 
real  estate  on  which  they  did  business  practi- 
cally unsalable,  their  homestead  valueless? 

To  thoroughly  understand  the  trend  of  mind 
of  the  voters  of  purely  agricultural  communi- 
ties, one  must  put  oneself  into  the  same 
conditions  that  the  farmer  now  finds  him- 
self in. 

A  good  ship  sails  over  summer  seas  laden 
with  a  precious  freight  of  human  lives  and 
their  treasures;  the  gentle  swelling  of  the 
waves  and  the  balmy  breezes  blowing  over 
deck  make  existence  upon  her  most  delight- 
ful. Over  her  quarter  the  water  is  churned 
into  cream  by  the  rapid  turning  of  her  pro- 
peller; and  all  on  board  are  happy  and  con- 
tented. In  comfort  and  safety  they  are  speed- 
ing toward  that  haven  that  they  hope  soon  to 
find.  Not  a  cloud  is  to  be  seen  in  the  sky; 
not  a  breath  of  air  save  that  which  the  ship's 
onward  motion  creates.  On  the  far-distant 
horizon  a  small  dark  spot  presents  itself  to 


24  FREE  BANKING. 

the  few  whose  eyes  are  trained  to  seek  just 
such  premonition  of  coming  storms. 

The  ship  and  time  speed  on,  and  all  eyes  on 
shipboard  soon  see  the  little  dark  spot.  Some 
believe  it  to  be  the  vanguard  cloud  of  an  im- 
pending storm;  others  that  it  is  an  island; 
others  that  it  is  a  great  ship.  All  are  honest 
in  their  separate  convictions.  Each  has  seen, 
by  natural  processes  of  brain  and  optic  nerves, 
what  each  has  described.  It  is  certain  that 
all  convictions  cannot  be  right.  In  that  case 
one  alone  could  be  correct — perhaps  none. 

In  a  little  time,  however,  no  one  would  be 
left  in  doubt.  The  black  clouds  will  present 
themselves  so  distinctly  to  their  vision  that  all 
soon  will  know  that  a  storm  threatens  them 
with  destruction.  The  government  of  a 
ship  at  sea  is  that  of  an  autocrat,  and  the 
maneuvering  of  the  ship  is  the  w^ork  of  its 
commander.  Upon  his  ability  as  a  seaman, 
upon  his  fidelity,  depend,  in  any  given  im- 
pending danger,  the  safety  of  his  government, 
the  lives  and  comfort  of  its  people,  the  security 
of  the  wealth  within  the  ship's  boundaries. 

Suppose  the  ship  be  not  under  autocratic 
control;  suppose  it  be  that  of  a  democratic 
community  in  which  all  on  board  are  equally 
interested  in  the  welfare  of  its  freight  of  human 
lives  and  communal  wealth ;  should  those  who 
saw  in  that  little  speck  on  the  horizon  an 


FREE  BANKING.  25 

island  or  a  ship,  be  forever  disfranchised  from 
having  a  voice  in  the  control  of  the  affairs  of 
that  ship?  Should  they  be  condemned  to  any 
degradation  or  distress  for  their  failure  to  see 
aright?  Surely  he  who  would  assert  the 
afHrmative  of  such  a  proposition  cannot  be  a 
good  citizen  of  a  republican  institution,  no  mat- 
ter if  perfectly  honest  himself  in  such  belief. 
Does  any  man  see  an  unworthy  and  dishonest 
cause  for  doubting  the  integrity  and  earnest- 
ness of  those  who  failed  to  see  that  the  little 
speck  was  a  cloud?  If  he  does,  then  his  own 
reasoning  is  faulty,  and  he  is  unfitted  to  be  a 
critic  of  other  men's  motives. 

Upon  that  ship,  where  all  are  equal  in  au- 
thority, suppose  the  majority  should  deter- 
mine that  the  best  seamanship  demanded  that 
the  helm  be  ported,  would  it  be  good 
policy,  would  it  be  just,  would  it  be  kindly, 
would  it  be  even  good,  hard,  common  horse- 
sense  for  that  majority  to  declare  and  reiter- 
ate that  those  who  wanted  to  starboard  the 
helm  were  anarchists,  knaves,  repudiationists, 
destructionists,  numskulls,  and  ignorant  hay- 
seeds? Would  it  mend  matters?  Would 
it  enable  the  ship  to  weather  with  more  ease 
and  security  the  next  storm  that  might  arise? 

And  who  can  tell  how  soon  that  storm  will 
come;  with  what  a  fury  it  will  rage?  Forty 
thousand    men    may    stand    viewing    an    ap- 


26  FREE  BANKING. 

preaching  storm.  There  may  be  a  division  of 
opinion  as  to  whether  the  storm  will  burst 
upon  them;  but  no  one  will  dispute  the  exist- 
ence of  the  clouds,  or  that  their  appearance 
portends  a  storm.  On  the  question  of  how 
best  to  protect  themselves  from  the  fury  of  the 
storm  there  will  be  many  opinions;  but  each 
opinion  may  be  the  honest  expression  of  a  de- 
sire that  all  shall  escape  from  a  calamity  that 
possibly  threatens  them  all. 

A  fire  started  on  the  prairies  by  some  care- 
less hunter,  discloses  itself  to  a  little  band  of 
travelers;  all  at  once  recognize  its  presence 
and  its  danger.  The  swift-blowing  breezes 
sweep  it  rapidly  toward  them.  Safety,  in  their 
opinion,  can  be  assured  only  by  starting  an- 
other fire  and  by  keeping  to  the  windward  of 
the  newly-started  conflagration  till  sufficient 
space  has  been  burned  over  in  front  of  them. 
On  this  they  may  stand  in  safety  from  the 
oncoming  fire.  By  their  act  of  starting  a  fire 
they  have  endangered  the  lives  and  property 
of  those  beyond. 

But  who  is  it  can  truthfully  say  that,  had 
his  environment  been  that  of  those  travelers, 
he  would  not  have  done  likewise?  The  most 
impressive  law  of  nature  is  that  of  self-preser- 
vation; and  those  endangered  prairie-travel- 
ers can  be  held  no  more  accountable  for  the 
destruction  to  life  and  property  that  the  fire 


FREE  BANKING.  27 

they  had  kindled  might  cause,  than  can  those 
who  in  the  last  Presidential  election  gave  their 
votes  to  Mr.  McKinley,  believing  that  the  elec- 
tion of  his  opponent  meant  the  destruction 
of  their  business  and  of  their  hope  in  life;  or, 
on  the  other  hand,  than  those  who  gave  their 
votes  to  Mr.  Bryan,  believing  that  the  elec- 
tion of  his  opponent  meant  the  continuance 
of  monetary  methods  that  were  responsible, 
they  believed,  for  the  grinding  poverty  they 
felt  themselves,  their  friends,  and  fellow- 
countrymen  to  be  afflicted  with. 


CHAPTER  11. 

The  cause  of  the  rapid  massing  of  great 
bodies  of  humanity  into  phenomenally  large 
cities  during  the  last  century,  is  a  problem  that 
has  been  a  fruitful  source  of  prolific  study  and 
discussion  by  political  economists.  Doubtless 
the  great  increase  of  facilities  for  rapid  and 
economic  transportation,  thereby  making  the 
victualing  of  the  people  of  such  cities  as  Lon- 
don, New  York,  Paris,  Berlin,  and  other  great 
centers,  not  only  a  possible  but  an  easy  task, 
has  had  much  to  do  with  the  development  of 
those  cities.  But  rapid  and  economical  trans- 
portation was  by  no  means  the  cause  of  such 
growth.     It  only  made  such  growth  possible. 

The  harnessing  of  the  subtle  forces  of 
nature, — as  steam  and  electricity, — and  the 
making  of  them  obedient  to  the  will  of 
man,  have  made  it  possible  for  the  crude  ma- 
terials for  the  manufacturing  arts  to  be 
brought  cheaply  to  the  great  cities,  and  there 
formed  into  the  various  articles  that  the  needs 
of  humanity  demand,  and  are  again  dis- 
tributed as  naturally  required,  thus  giving  em- 
ployment to  the  dwellers  in  the  cities.  But 
28 


FREE  BANKING.  29 

the  mere  fact  of  it  being  possible  to  give  em- 
ployment to  the  dwellers  in  cities  does  not 
constitute  a  cause  for  people  huddling  into 
them,  as  they  have  been  doing  during  the 
last  century. 

Man  is  essentially  a  social  animal,  and,  when 
mentally  normal,  seeks  the  companionship  of 
his  fellow-men.  He  is  a  progressive  animal, 
too,  and  seeks  for  enlightenment  wherever  his 
judgment  leads  him  to  believe  he  can  find  it. 

Here  again  we  have  an  important  factor  in 
the  building  of  villages,  towns,  and  cities; 
although  not  a  sufficient  one.  But,  after  all, 
it  is  not  because  of  the  ease  by  which  food  may 
be  got  to  them,  nor  because  natural  forces 
have  been  harnessed  by  man,  and  made  sub- 
servient to  his  will,  nor  for  social  advantages, 
that  the  young,  intelligent,  and  active  men  go 
from  the  farms  and  the  villages  to  the  great 
cities;  it  is  rather  because  they  believe  that  re- 
wards for  effort  put  forth  by  them  are  greater 
in  the  cities  than  in  the  country.  It  is  not  the 
allurement  of  the  tinsel  and  gold  of  the  cities, 
nor  is  it  so  much  the  more  generous  food 
supply,  the  more  pleasant  companionship,  that 
attracts  them ;  it  is  more  generally  the  glowing 
pictures  of  ease  and  comfort  of  the  cities,  por- 
trayed to  them  by  those  of  their  acquaint- 
ances who,  at  some  time  more  or  less  recent, 
had,  like  themselves,  labored  in  the  country, 


30  FREE  BANKING. 

but,  unlike  them,  to  mend  their  fortune  had 
gone  away  to  the  city.  There  they  had  met 
with  fair  success,  and  had  come  back  well 
clothed  and  apparently  well  kept,  to  enjoy  a 
short  holiday  of  rest. 

If  those  thousands  of  young  men  who 
are  now  so  anxious  to  change  their  country 
homes  for  homes  in  the  city  could  but 
feel  with  the  same  confidence  that  their 
efforts  to  secure  a  fortune  in  their  country 
homes  would  be  equally  rewarded  as  that 
hope  born  of  the  evidence  of  prosperity  of 
their  kind  who  have  gone  to  the  cities  bids 
them  believe  will  be  their  reward  in  the  cities, 
not  one  in  a  hundred  would  ever  think  of  leav- 
ing the  friends  and  associates  of  childhood  and 
youth  for  the  dazzling  brilliancy  of  the  cities. 
Those  who  change  their  dwelling  places  from 
the  country  to  the  city  are  almost  invariably 
induced  to  that  act  because  they  believe  that 
the  problem  of  how  to  maintain  life  with  the 
greatest  ease  is  more  readily  and  more  satis- 
factorily solved  in  the  cities  than  in  the 
country. 

As  water  fallen  from  the  skies  to  the  high- 
lands finds  its  way  to  the  sea  along  lines  that 
offer  the  least  resistance,  so  does  man  seek 
for  his  subsistence  along  those  lines  that  afford 
him  the  greatest  ease.  From  the  dawn  of 
civilization  all  records  seem  to  support  the 


ft     UI>i!VtLKiiU  T     I 

FREE  BANKffSs^^^^,^^^  "i"^ 

affirmation  that  tilling  the  soil  has  ever  been 
the  most  laborious,  the  least  exciting,  and  least 
attractive  occupation  of  man.  Under  ordi- 
narily favorable  conditions  it  has  been  health- 
ful, and  man  has  developed  brawn  and  brain- 
powders  under  its  influence.  The  fields  and 
farms  have  throughout  the  ages  furnished  to 
mankind  the  spirit  of  progression  from  which 
very  largely  has  come  that  development  that 
has  transformed  man  from  a  nomad  to  that 
high  enlightenment  he  has  attained,  and  it  is 
now  a  debatable  question  whether  man,  ex- 
clusively under  the  influence  and  the  culture 
of  the  civilization  that  directs  the  ethics  of 
great  cities,  would  not  become  a  degenerate. 
The  ages  may  be  called  as  convincing  wit- 
nesses to  prove  that  the  fields  and  farms  have 
no  such  fatal  influence.  The  progressive  man 
among  the  agriculturists  who  selects  some 
field  for  his  talents  other  than  that  of  culti- 
vating the  soil,  may  progress  more  rapidly  by 
going  to  the  cities  to  pursue  studies,  because 
there  he  will  find  a  greater  opportunity  for  in- 
vestigation. He  will  find  also  allurements  to 
lead  him  from  his  work  intO'  avenues  of 
ease  and  pleasure,  which,  if  he  does  not  re- 
sist, will  vitiate  the  progressive  spirit  within 
him. 

It  is  not  necessary,  however,  to  draw  a  com- 
parison between  the  merits  of  humanity  on 


32  FREE   BANKING. 

farms  and  humanity  in  cities,  much  less  to 
glorify  one,  or  to  disparage  the  other.  To 
awaken  the  public  to  the  fact  that  the  agri- 
culturists of  the  world  have  always,  under  fair 
conditions,  been  decidedly  progressive,  is,  on 
the  other  hand,  desirable. 

Success  is  an  unsatisfactory  criterion  of  ex- 
cellence, but  to  be  uniformly  successful  is 
certainly  strong  evidence  of  superiority,  and 
the  successes  of  the  children  of  the  farm  in  all 
the  various  phases  of  human  struggles  for 
supremacy  have  been  quite  marked.  It  is 
absurd  to  deny,  on  the  score  of  lack  of  intel- 
lect, to  the  tillers  of  the  soil  the  right  to  claim 
equal  privileges  in  afifairs  of  state. 

There  is  a  vast  difference  in  the  meaning  of 
the  terms  intelligence  and  intellect,  although 
the  one  is  frequently  used  as  the  synonym  of 
the  other.  A  dull  mind  may,  by  careful  cul- 
ture, be  developed  to  a  degree  of  knowledge 
that  may  enable  it  to  reason  with  force  and 
even  vigor.  But  such  mind  must  be  continu- 
ally forcing  the  sense  of  memory  to  an  in- 
ordinate energy.  That  in  a  measure  afifects 
the  power  of  that  mind.  Tlie  possessors  of 
such  minds  may  truly  be  classed  as  intelligent. 
But  intellect  is  a  gift,  something  born  with  the 
body,  and  which,  unaided,  will  cause  the  soul 
or  will  of  such  a  body  to  seek  for  information 
or  intelligence.     An  intelligent  mind  does  not 


FREE  BANKING.  33 

stand  upon  the  same  plane  with  an  intellec- 
tual mind.  Intelligence  is  acquired.  Intel- 
lect is  a  gift.  The  intelligent  mind  in  pursuit 
of  knowledge  may,  under  more  favorable  con- 
ditions, surpass  the  intellectual  mind;  but,  all 
things  being  equal,  it  will  always  be  behind 
it  in  the  struggle  for  mental  supremacy  or 
progress. 

Hygienics  is  as  essential  to  mental  de- 
velopment as  are  training  schools.  A  dis- 
eased body  may  contain  a  highly  developed 
mind,  but  the  seed  of  that  body  most  gener- 
ally develops  a  degenerate.  Hothouse  plants 
are  frequently  more  brilliant  than  those  pro- 
duced in  the  open  air,  but  they  are  never  so 
hardy,  and  the  seed  of  the  hothouse  plant 
almost  universally  produces  a  degenerate  of 
its  species.  Does  this  not  teach  a  wholesome 
lesson?  May  it  not  be  that  much  of  the  bril- 
liancy in  the  minds  of  those  reared  in  the  cities 
is  the  result  of  the  hothouse-forcing  system  of 
education  prevalent  in  the  cities,  and,  like 
other  hothouse  plants,  may  the  seed  be  not 
more  certainly  depended  upon  to  produce  a 
degenerate  than  otherwise? 

It  is  undeniable  that  a  very  large  proportion 
of  those  men  who  have  stamped  their  names 
indelibly  on  the  pages  of  recorded  history 
have  been  those  .vhose  earlier  opportunities  for 
education  have  been  limited  by  rural  environ- 


34  FREE  BANKING, 

ments,  and  who,  in  spite  of  these  hmited  means 
for  acquiring  knowledge,  have  become  great 
in  all  the  various  professions  and  avocations  of 
life.  There  is  no  good  reason  now  for  sup- 
porting the  theory  that  there  has  in  recent 
years  been  any  degeneration  of  the  mental 
capabilities  of  rural  populations. 

Nor  can  the  theory  that  there  has  been  any 
marked  mental  progression  among  the  in- 
habitants of  the  great  city  be  successfully 
maintained. 

Unless  indeed  it  can  be  successfully  main- 
tained that  the  rural  population  of  the  United 
States  are  degenerates,  and  that  the  popula- 
tion of  towns  and  cities  are  progressive,  it  is 
not  only  unwise,  it  is  absolutely  senseless,  to 
maintain  that  the  great  mass  of  American  vot- 
ers were  not  controlled  in  their  voting  by 
sense  of  reason  when,  by  their  votes,  they  gave 
their  consent  to  the  free  coinage  of  silver  by 
the  mints  of  the  United  States. 

It  is  quite  possible  that  a  great  majority  of 
those  who  consented  to  the  free  coinage  of 
silver  by  our  Government  believed  that  free 
coinage  alone  was  not  the  remedy,  but  that 
the  monetary  methods  of  the  present  time 
were  oppressive  to  the  struggling  industrial 
classes,  and  that  free  coinage  of  silver  was  a 
step  in  the  direction  of  a  reform  that  they  be- 
lieved necessary  for  the  commonweal. 


FREE  BANKING.  35 

Had  they  no  cause  to  believe  that  a  reform 
in  the  monetary  system  of  our  country  is  a 
necessity?  That  necessity  has  been  recog- 
nized by  every  Congress  assembled  in  Wash- 
ington since  the  War  of  the  Rebellion,  and  it 
must  indeed  be  a  dull  mind  that  did  not  per- 
ceive in  the  currency  panic  of  1893,  and  in  the 
rapid  depletion  of  the  Treasury  of  its  gold  in 
1895-96,  a  most  serious  defect  in  our  mone- 
tary system. 

Examine  for  a  moment  the  plain  facts  of  the 
currency  panic  of  1893.  In  that  year  there 
was  somewhere  hidden,  or  in  use,  in  the 
United  States  $1,111,720,898  of  paper  money, 
the  redemption  of  which  was  guaranteed  by 
the  United  States.  In  addition  to  this,  there 
was,  according  to  the  reports  of  the  Treasury 
Department,  in  use  or  in  reserve  throughout 
this  country,  in  gold  and  silver  coins  and  bul- 
lion,— all  serving  the  purpose  of  money, — 
$1,213,413,584,  or  a  total  money  supply  of 
2,325,134,482.  Statistics  of  the  money  sup- 
ply were  prepared  by  the  Treasury  Depart- 
ment showing  that  there  was  a  per  capita 
circulation  of  nearly  $15  in  paper  money  alone 
in  the  United  States.  No  thoughtful  man  will 
doubt  that  ample  money  had  been  provided 
for  all  business  demands  of  the  country.  But 
the  monetary  methods  of  the  country  were  so 
defective,  that  but  a  small  part  of  this  vast 


36  FREE  BANKING. 

issue  of  currency  could  be  made  available  by 
the  people.  For  some  undefinable  reason,  or 
insane  impulse,  the  whole  nation,  as  one  man, 
seemed  suddenly  to  become  impressed  with 
the  conviction  that  there  would  in  the  very 
near  future  be  a  great  scarcity  of  currency 
bills. 

This  impulse  could  not  have  been  the  re- 
sult of  a  distrust  of  the  silver  certificates,  or 
because  of  silver  legislation,  because  the 
silver  certificates  were  with  the  green- 
backs, national  bank  and  coin  notes,  care- 
fully concealed  in  the  safety-deposit  vaults, 
and  between  the  leaves  of  the  family  Bible, 
and  other  similar  secure  hiding  places.  The 
silver  dollar  bill  commanded  a  premium  in 
gold  on  the  counters  of  the  money  dealers. 
The  gold  and  silver,  coin  and  bullion,  in  the 
vaults  of  the  Government  could  not  be 
moved  but  to  meet  current  expenses  of  the 
Government;  hence  it  was-  practically  not 
money  in  circulation.  Probably  sixty  per 
cent,  of  the  paper  money  of  the  country  was 
hidden  from  circulation. 

It  is  quite  probable  that  at  the  time  of  the 
greatest  contraction  of  currency  in  1893,  there 
was  not  in  circulation  in  the  entire  country 
more  than  $400,000,000  of  money  available  for 
business  purposes.  What  remained  of  the 
money  of  the  country  was  securely  withheld 


FREE  BANKING.  37 

from  the  public.  Within  six  weeks  from  that 
time  confidence  had  been  restored,  the  insane 
had  become  rational,  the  intoxicated  returned 
to  sobriety,  and  the  entire  mass  of  hidden  bills 
were  again  put  into  circulation.  Within  six 
months  the  credit  of  the  country  had  oscillated 
from  vigorous  health  to  the  verge  of  dissolu- 
tion, and  was  again  restored  to  its  full  and 
healthy  vigor.  Within  that  time  the  currency 
had  been  contracted  nearly  or  quite  sixty  per 
cent.,  then  suddenly  expanded  to  its  extreme 
bounds. 

Can  any  country  prosper,  can  its  finances 
ever  be  healthy,  when  such  conditions  may 
threaten  it  at  any  time?  Tariff  legislation, 
presumably  an  innocent  business  of  Congress 
to  provide  revenues  for  government,  has  for 
many  years  menaced  the  stability  of  business 
affairs  in  the  United  States,  and  Congress  may 
at  any  time,  in  the  course  of  natural  and  nec- 
essary legislation,  cause  a  contraction  of  the 
currency,  either  of  its  paper  or  its  coins,  by 
simply  starting  an  alarm  that  will  send  the 
bills  or  the  coins,  as  the  case  may  be,  into  the 
safe  deposit  vaults,  or  old  stocking,  or  between 
the  leaves  of  the  family  Bible. 

The  financial  scare  of  1895-96  was  the  re- 
sult of  a  fear  by  those  rich  enough  to  be 
lenders  of  money  that  the  purchasing  power 
of  the  dollar,  in  the  event  of  our  Government 


38  FREE  BANKING. 

opening  its  mints  to  the  free  coinage  of  silver, 
would  be  decreased,  and  that  they  would  be 
compelled  to  receive,  in  payment  for  their 
loans,  less  value  than  they  gave. 

It  is  difficult  to  find  in  their  reasoning  any 
error  on  this  question.  Thousands  of  those 
who  could  afford  to  buy  gold  and  hide  it, 
did  so:  some  from  a  sense  of  security,  others 
from  purely  speculative  motives.  Banks,  to 
a  very  great  extent,  substituted  in  their  vaults 
gold  for  bills  for  the  reserved  funds,  and  pri- 
vate citizens,  to  a  very  great  extent,  locked  it 
in  safe-deposit  vaults.  "  Here  a  little  and 
there  a  little  "  of  the  gold  coins  of  the  coun- 
try was  hidden  away,  until  practically  the  en- 
tire coined  gold  supply  of  the  country  was 
effectively  withdrawn  from  public  use.  Twice 
the  gold  reserve  of  the  country  was  depleted 
to  an  extent  that  impaired  the  credit  of  the 
country.  The  third  time,  two  months  before 
th€  last  Presidential  election,  the  Treasury 
came  nearer  being  depleted  of  its  gold  than 
ever  before;  so  much  so  that  it  became  ap- 
parent to  the  dealers  in  money,  and  to  the 
bankers  of  the  country,  that  any  attempt  by  the 
Government,  by  bond-selling,  to  again  replen- 
ish the  Treasury  with  gold,  would  result 
either  in  turning  the  Government  over  to 
those  who  favored  free  coinage  of  silver,  or  so 
disastrously  affect  our  credit  that  the  whole 


FREE  BANKING.  39 

system  of  American  securities  would  be  sadly 
impaired. 

It  was  therefore  necessary  for  the  banks  to 
demonstrate  to  the  public  that  they  were  doing 
business  on  a  sound  basis,  and  were  abun- 
dantly able  to  come  to  the  aid  of  the  Govern- 
ment. This  they  at  once  did — which  they 
could  easily  have  done  eighteen  months  be- 
fore. By  simply  exchanging  gold  for  Gov- 
ernment paper  money,  silver  certificates 
included,  they  furnished  the  Government 
with  the  necessary  gold  to  maintain  its  reserve. 
The  rapid  rise  in  the  value  of  wheat,  caused 
by  the  great  demand  for  American  wheat 
in  foreign  countries,  has  since  made  it  easy 
for  the  Government  to  maintain  its  gold 
reserve. 

But  wheat,  the  very  cause  of  relief  to  the 
Treasury,  and,  at  a  critical  moment,  so  great 
a  help  to  the  credit  of  the  country,  is,  notwith- 
standing, a  menace  to  the  permanency  of  that 
credit.  When  India,  Russia,  and  the  Argen- 
tine Republic  again  produce  great  crops  of 
that  cereal,  those  who  deal  in  money  for  a 
profit,  will  see  a  possibility  of  our  paper  money 
— the  basis  of  which  is  silver  dollars — being 
worth  less  than  a  gold  dollar;  they  will  then 
begin  insidiously  to  deplete  the  Treasury  of  its 
gold,  unless  this  or  the  next  Congress  con- 
clude that  governments  should  not  do  bank- 


40  FREE  BANKING. 

ing  business,  and  provide,  thereby,  for  its 
discontinuance  by  the  United  States. 

But  upon  what  can  we  base  a  hope  that 
Congress  will  commit  so  wise  an  act  of  legis- 
lation? Certainly  not  by  the  records  of  that 
body  for  the  last  forty  years;  not  by  the  plat- 
form of  principles  promulgated  by  any  of  the 
parties  and  factions  of  the  last  year. 

The  nearest  approach  to  a  decided  declara- 
tion against  the  Government  engaging  in  a 
banking  business  was  made  by  the  National 
Democracy  at  Indianapolis.  But  so  long  as 
any  government  uses  all  its  powers  of  gov- 
ernment to  dictate  what  kind  of  paper  money 
shall  be  used  as  money,  and  also  guarantees 
the  redemption  of  such  money  in  the  most 
valuable  coined  money  of  the  country,  so  that 
such  money  shall  at  all  times  and  at  any  point 
within  the  limits  of  that  government  be  equal 
in  value  to  the  standard,  and  by  prohibition  or 
taxation  prohibits  the  use  of  any  other  kind 
of  paper  money,  that  government  remains  in 
the  banking  business,  and  to  the  disadvantage, 
too,  of  the  industries  of  that  country. 

The  powers  of  the  Federal  Congress  are  de- 
fined by  the  Constitution.  The  Constitution 
provides  that  Congress  shall  have  power  "  to 
coin  money,  regulate  the  value  thereof  and 
of  foreign  coins,  and  fix  the  standard  of 
weights  and  measures." 


FREE  BANKING.  41 

It  would  be  impossible  to  frame  a  paragraph 
in  the  English  language  that  would  more  con- 
cisely express  its  meaning  than  that  relating  to 
the  powers  of  Congress  in  relation  to  money. 
The  concluding  sentence,  relating  to  weights 
and  measures,  declares  beyond  the  possibility 
of  a  doubt  that  the  framers  of  the  Constitu- 
tion intended  that  Congress  should  have  no 
power  over  the  money  of  the  country  other 
than  to  coin  the  precious  metals  and  define 
what  each  coin  should  consist  of,  and  what  its 
relative  value  to  the  standard  should  be.  To 
Congress  was  given  the  power  to  establish 
a  standard  of  money,  of  weight,  and  of 
measures. 

That  the  power  of  Congress  was  limited  to 
such  specific  work  in  regard  to  money  was  not 
seriously  disputed  until  1865.  The  Secretary 
of  the  Treasury,  Mr.  Chase, — who  was 
largely  instrumental  in  inducing  Congress  to 
issue  greenbacks, —  did  not  believe,  never  pre- 
tended to  believe,  that  Congress  had  the 
power  to  stamp  a  piece  of  paper  and  make  it 
a  legal  tender.  This  fact  was  shown  later  in 
his  opinion  when,  as  Chief  Justice  of  the 
United  States,  he  decided  the  legal-tender 
legislation  to  be  unconstitutional. 

If  Congress,  under  the  imitations  of  Article 
First,  Section  8,  and  Paragraph  5,  of 
the  Federal  Constitution,  is  given  the  power 


42  FREE  BANKING. 

to  fix  a  value  at  which  public  and  pri- 
vate creditors  must  accept  any  piece  of 
paper  or  coin  in  payment  of  money  owed 
to  them,  they  have  the  right  also  to  in- 
crease or  diminish  the  weights  and  meas- 
ures. They  can  declare  that  eight  ounces 
shall  constitute  a  pound,  and  that  six  inches 
shall  measure  a  foot.  All  unfulfilled  con- 
tracts calling  for  those  things  sold  by  weight 
and  measures  would  be  settled,  except  by  con- 
cession, by  the  new  scales  of  weights  and 
measures,  and  every  man  who  had  contracted 
to  buy  would  thereby  be  robbed. 

Is  there  a  sane  man  in  America  who  will 
assert  as  his  belief,  that  the  Supreme  Court 
of  the  United  States,  as  constituted  since  its 
organization,  would  ever  have  asserted  the 
constitutionality  of  laws  that  state  untruths? 
It  is  manifest  that  a  law  that  declared  six 
inches  to  be  a  foot,  or  eight  ounces  to  be  a 
pound,  would  be  an  untruth. 

Would  it  not  be  most  unjust  if  a  law  that 
provided  that  those  who  had  made  contracts, 
prior  to  the  passing  of  the  law,  for  looo  feet 
of  piping  for  delivery  at  some  future  time, — 
which  proved  to  be  subsequent  to  the  passage 
and  enforcement  of  the  new  law, — should, 
nevertheless,  make  it  mandatory  to  accept  in 
satisfaction  of  such  contracts  the  delivery  of 
500  feet  of  piping  because  the  new  law  had 


FREE  BANKING.  43 

declared  6000  inches  and  not  12,000  inches  to 
be  the  equivalent  of  1000  feet?  It  would  be 
robbery  to  compel  those  who  had  contracted 
for  the  delivery  of  a  ton  of  coal,  to  accept  in 
satisfaction  of  such  a  contract  the  delivery  of 
1000  pounds  of  coal  because  the  new  law  had 
declared  16,000  and  not  32,000  ounces  to  be 
the  equivalent  of  a  ton. 

To  reduce  the  value  of  the  metal  in  the 
coins  and,  by  legal-tender  enactments,  to  force 
them  on  the  creditors  of  the  country  would, 
at  any  time  in  the  history  of  our  country,  have 
been  held  by  our  Supreme  Court  to  be  uncon- 
stitutional. 

Is  there  anyone  who  seriously  doubts  this 
proposition? 

But  the  Supreme  Court,  asserting  a  legis- 
lative power  never  given  to  it  by  the  Consti- 
tution, overturned  all  precedents,  and  declared 
that  Congress  possesses  the  power  to  have 
stamped  on  a  piece  of  paper  of  no  intrinsic 
value  the  words  "  one  dollar,"  and  make  its 
debt-paying  power  equal  to  that  of  the  gold 
dollar  of  the  United  States.  Under  that  de- 
cision Congress  may  have  printed  enough 
paper  dollars  to  pay  ofif  its  indebtedness.  By 
the  time  the  Government  have  issued  two  or 
three  thousand  millions  of  such  dollars,  and 
been  making  a  few  payments  in  this  kind  of 
money  to  the  Supreme   Court  Jtidges,  that 


44  FREE  BANKING. 

honorable  body  will  perhaps  more  earnestly 
study  the  Constitution  of  our  country  and  thus 
arrive  at  the  agreement  that  coining  money 
does  not  mean  printing  on  paper. 

There  are  certain  scandals,  of  course,  the 
less  said  of  them  the  better  will  morals  be 
promoted.  That  legal-tender  decision  may 
be  one  of  them.  But  may  it  not  be  well  for 
those  who  have  received  the  benefits. of  that 
decision,  and  those  who  sustain  it  as  a  patri- 
otic measure  growing  out  of  the  necessities  of 
our  country,  not  to  throw  stones  too  violently 
at  that  Chicago  fabric  known  as  the  Demo- 
cratic platform  of  1896?  One  of  its  planks 
emphatically  indorses  the  issuing  of  paper 
money  as  not  only  a  delegated  power  of  Con- 
gress, but  declares  it  also  to  be  the  duty  of 
the  Government  to  do  so  to  the  exclusion  of 
all  other  paper  money.  By  direct  assertion 
the  Chicago  platform  protests  against  the  use 
of  national-bank  paper  issue,  and  by  its  silence 
on  the  subject  it  in  a  measure  opposes  State 
and  private-bank  paper  money. 


CHAPTER  III. 

During  the  heat  of  the  canvass  of  the  late 
Presidential  elections  the  candidate  of  the  Re- 
publican party,  with  masterly  stage  effect,  ap- 
parently, gave  utterance  to  the  declaration 
that,  we  must  have  "  a  dollar  as  sound  as 
the  Government,  and  as  untarnished  as  its 
honor." 

There  may  be  a  great  uncertainty  as  to  the 
meaning  of  that  utterance  of  Mr.  INIcKinley 
if  he  did  not  intend  it  for  dramatic  effect,  but 
if  he  really  meant  what  he  said,  then  his  dol- 
lar of  the  United  States,  to  be  at  all  times 
"  as  sound  as  the  Government  and  as  un- 
tarnished as  its  honor,"  would  be  some- 
what elastic,  not  in  the  quantity  but  in  the 
quality. 

When  the  Government  issued  its  first  green- 
back currency,  compelling  the  creditors  of  the 
country  to  receive  it  in  payment  of  amounts 
due  both  from  Government  and  private 
individuals,  and  refused  to  receive  it  for  taxes 
due  to  the  nation,  the  Government,  it  is  true, 
issued  money  "  as  sound  as  the  Government 
and  as  untarnished  as  its  honor."     And  this, 


46  FREE  BANKING, 

according  to  history,  appears  to  have  been 
worth,  judged  by  the  standard  of  gold,  some- 
where between  one  and  sixty  per  cent,  below 
par.  The  different  rates  of  discount  varied 
as  the  Government's  prospects  of  life  or  death 
presented  itself  to  that  honored  body  of  pub- 
lic benefactors  and  citizens  of  the  world — the 
money-lenders. 

Again,  in  1893,  this  same  band  of  philan- 
thropists had  become  so  firmly  impressed  with 
the  stability  of  the  Government  that  they  were 
induced  to  consider  the  various  bills  of 
the  United  States  currency — especially  of  the 
smaller  denominations — as  commodities  too 
precious  to  be  used  for  such  base  purposes  as 
paying  debts,  excepting  debts  of  honor  and  for 
labor;  and  so  these  same  philanthropists 
bought  the  various  currency  bills  and  stowed 
them  away,  thus  creating  a  corner  in  currency, 
just  as  "  vulgar  speculators  "  in  the  necessities 
of  life  buy  corn  and  wheat  to  store,  to  create  a 
corner  in  breadstuff.  But,  on  that  occasion, 
was  it  the  paper  dollar  or  the  gold  dollar  that 
was  "  sound  and  untarnished  "?  Who  among 
the  voters  of  the  country  shall  say  which  of  the 
two  dollars  now  issued  in  metal — the  gold  or 
the  silver  dollar — is,  or  is  not,  "  a  dollar  as 
sound  as  the  Government  and  as  untarnished 
as  its  honor."  Shall  it  be  those  millions  who 
voted  for  Mr.  Bryan,  and,  presumably,  for 


FREE  BANKING.  47 

free  coinage  of  silver  and  for  the  silver  dollar 
as  a  standard?  Or  shall  it  be  those  other  mil- 
lions who  voted  for  and  elected  Mr.  McKinley, 
and,  presumably,  demanded  that  the  gold  dol- 
lar should  be  the  standard  of  value  in  the 
United  States?  Who  shall  or  shall  not  de- 
termine whether  the  honor  of  the  country  was 
or  was  not  tarnished  when  a  Congress,  elected 
by  the  people  at  an  election  when  the  money 
question  was  hardly  considered,  voted  to 
demonetize  silver — a  measure  by  which  the 
creditor  class  would  have  all  to  gain  and  noth- 
ing to  lose;  while,  on  the  contrary,  the  debtor 
class  had  all  to  lose  and  nothing  to  gain  by 
such  demonetization?  Shall  it  be  the  cohorts 
of  Mr.  Bryan,  or  of  Mr.  McKinley? 

Silver  and  gold  are  commodities  and  not 
money  when  in  the  form  of  bullion.  They  are 
commodities  of  which  for  ages  the  principal 
use  has  been  for  money,  or  as  a  basis  for 
money.  For  ages  the  value  of  the  gold  and 
silver  coins  has  been  determined  by  the  bul- 
lion value  of  the  gold  or  silver  the  coins  con- 
tained. As  commodities  each  was  used  for 
the  same  common  purpose — to  furnish  a  con- 
venient method  for  the  exchange  of  commodi- 
ties. Had  there  been  no  gold  in  the  world, 
the  world's  demand  for  silver  for  the  purposes 
of  money  would  have  been  much  greater; 
consequently,    the    purchasing    power    of    a 


48  FREE  BANKING. 

pound  of  silver  would  have  been  greater. 
Had  there  been  no  silver  in  the  world,  the  pur- 
chasing power  of  a  pound  of  gold  would  have 
been  greater. 

In  many  parts  of  the  United  States  it  is  not 
an  uncommon  thing  to  find  a  mule  and  a 
horse  hitched  together  drawing  a  load,  which, 
by  their  united  efforts,  they  move  readily.  If 
the  public  demanded  that  only  horses  should 
be  used  to  pull  such  loads,  it  is  evident  that 
in  those  communities  where  like  conditions 
exist  an  increased  demand  for  horses  would  be 
created,  and  the  demand  for  mules  would  be 
decreased.  And  so,  to  extend  the  figure,  if 
the  world  should  unite  in  proscribing  the 
mule  and  demanding  the  horse,  the  value  of 
horses  would  vastly  increase,  and  the  mule 
would  manifestly  have  only  such  value  as  the 
curio-seeker  and  the  arts  might  give  it. 
Were,  indeed,  the  production  of  horses  limited 
in  line  with  the  limitation  of  gold  productions, 
the  value  of  that  animal  would  be  vastly  in- 
creased. Why  does  not  the  law  of  supply 
and  demand,  which  governs  one  division  of 
the  world's  commodities,  apply  to  all  other 
sets  of  similar  commodities? 

It  does  apply;  and  to  gold  and  silver,  it  also 
applies;  and  so  by  the  demonetization  of  sil- 
ver by  the  great  commercial  nations,  the 
value  of  gold  was  enhanced;  its  purchasing 


FREE  BANKING.  49 

powers  were  increased,  while  those  of  silver 
were  decreased. 

It  is  possible  that,  had  the  commercial 
nations  made  no  effort  to  demonetize  silver, 
that  metal,  in  comparison  with  gold,  might 
have  fallen  during  the  last  twenty  years,  but 
not  to  the  great  extent  it  has  declined.  It  is, 
therefore,  not  unreasonable  to  believe  that,  if 
all  the  great  commercial  nations  of  the  world 
were  to  open  their  mints  to  the  free  coinage 
of  both  silver  and  gold,  the  demand  of  the 
debt-payers  for  the  cheaper  metal, — silver, — 
and  consequently  a  depressed  market  for  gold 
for  purpose  of  coinage,  would  very  shortly 
drive  the  gold-bullion  holders  to  offer  their 
bullion — gold — for  coinage.  For,  by  thus 
giving  to  the  debtor  class  the  option  of  these 
two  metals  with  which  to  pay  their  debts, 
those  nations  would  fix  the  ratio  of  one  ounce 
of  gold  to  ten  ounces  of  silver. 

But  so  long  as  a  half  dozen  of  the  greater 
commercial  nations  demonetize  silver,  it  can- 
not, in  all  probability,  be  rehabilitated  by  the 
United  States  as  money  at  a  ratio  with  gold 
satisfactory  to  the  commercial  world.  For  so 
long  as  those  great  trading  nations  accept 
silver  at  only  its  bullion  value,  its  value,  meas- 
ured by  that  of  gold,  will  continue  to  fluctuate 
to  an  extent  too  great  to  be  accepted  by  the 
traders  of  the  gold-standard  nations  as  the 


5©  FREE  BANKING. 

measure  by  which  the  commodities  that  they 
sell  to  the  silver-standard  nations  shall  be 
paid;  while,  on  the  other  hand,  the  fluctuation 
of  the  value  of  gold,  measured  by  that  of  silver, 
will  also  vary  to  such  an  extent  that  traders 
in  the  silver-standard  nations  will  be  greatly 
inconvenienced  in  their  business  operations. 
Importers  of  silver-standard  nations  would  be 
in  no  better  condition  than  would  be  the  im- 
porters of  gold-standard  nations.  Interna- 
tional trade,  consequently,  would  be  very 
greatly  interfered  with.  And  any  interference 
with  international  trade  is  to  the  disadvantage 
of  the  people  affected  by  it;  though  it  be  a 
people  that  has  reached  but  the  condition  of 
semi-civilization;  while  it  is  to  the  greater  dis- 
advantage of  those  who  accept  the  least  used 
and  least  convenient  and  least  forcible  money 
standard. 

There  can  be  no  great  exporting  nation  that 
is  not  also  a  great  importing  nation.  That 
wise  member  of  the  present  Congress  who,  in 
his  campaign  literature,  announced  that  he 
was  in  favor  of  *'  the  world's  market  for 
American  workmen,  and  not  for  the  pauper 
labor  of  Europe,"  wrote  himself  down  an  un- 
thinking man  when  he  made  that  his  battle 
cry.  Nevertheless,  owing  to  the  blind  big- 
otry, the  unreasonable  passion,  and  the  asinine 
proclivities  of  his  constituency,  and  also  the 


FREE  BANKING.  5 1 

fact  that  his  competitors  were  of  the  same  kind 
with  but  sHght  variations,  he  was,  unfortu- 
nately for  his  country,  elected. 

That  the  people  of  the  United  States  could 
live  and  be  progressive  and  prosperous  if  sur- 
rounded by  an  impassable  barrier  may  be  con- 
ceded to  be  a  fact,  were  climatic  influences  to 
remain  the  same.  That  they  would  not  en- 
joy the  same  comforts,  nor  progress  as  rapidly 
in  the  arts  and  in  science,  is  also  a  truth 
that  a  few  thoughtful  moments  will  fully 
corroborate. 

Nearly  every  part  of  the  world  contributes 
to  the  pleasures  of  the  breakfast  of  even  the 
poorer  of  the  workingmen  of  the  United 
States.  Tea,  coffee,  the  condiments,  and 
much  of  the  sugar,  without  which  that  break- 
fast would  be  very  unsatisfactory,  come  to  us 
from  foreign  lands.  These  contributions  are 
in  exchange  for  those  products  of  which  we 
have  an  excess ;  while  the  contributions  of  for- 
eign lands  to  the  pleasure  and  comforts  of  the 
well-paid  and  the  rich  among  our  citizens  are 
much  greater.  The  United  States  might 
be  rich  if  it  were  a  world  to  itself,  but  it 
would  become  much  richer  by  having  that 
world  enlarged;  providing  that,  in  the  enlarge- 
ment, new  conditions  of  climate,  new  soil  and 
culture  were  added. 

No  civilization  has  ever  been,  nor  ever  will 


52  FREE  BANKING. 

be,  satisfied  with  the  productions  of  the  terri- 
tory within  which  that  civihzation  exists.  No 
environments  have  ever  been  placed  about 
man  that  did  not  create  within  him  the  desire 
to  surmount  or  overcome  them.  The  greater 
man's  enhghtenment,  the  more  intense  is  his 
desire  to  overcome  enforced  environment. 
To  restrict  man  by  legislation  from  the  exer- 
cise of  his  natural  right  is  at  once  to  make 
of  him  a  secret  or  open  rebel  against  the  gov- 
ernment so  restricting  him.  In  a  popular  gov- 
ernment like  that  of  the  United  States,  or  of 
the  States  of  the  Republic,  it  is  impossible  to 
enforce  a  law  that  is  contrary  to  public  opin- 
ion. This  is  a  perfectly  apparent  proposition, 
which,  happily,  few  minds  fail  to  accept  as 
truth.  Yet  many  of  our  philanthropists  and 
statesmen  have  evidently  failed  to  grasp  it 
when  applied  to  certain  features  or  conditions. 
The  result  is,  the  statute  books  of  the  States  of 
the  United  States  and  of  the  general  Govern- 
menit  are  crowded  with  unpopular  laws  that 
have  become  dead  letters,  no  attempt  ever 
being  made  to  enforce  them.  There  they  re- 
main, monuments  to  the  impotency  of  minori- 
ties and  to  the  imbecility  of  legislators.  More- 
over, they  are  harmful,  a  mienace  to  morals, 
and  alas!  too  frequently,  a  lever  in  the  hands 
of  the  unscrupulous  wise  to  oppress  the  timid 
innocent. 


FREE  BANKING.  53 

Around  that  spot  upon  this  globe  that 
civiUzation  has  determined  to  be  the  North 
Pole,  the  eternal  ages  have  placed  a  barrier  of 
snow  and  ice,  guarded  by  a  cruelly  frigid 
atmosphere.  So  far  that  barrier  has  resisted 
all  attempts  of  man  to  surmount  the  spot.  Of 
all  the  men  who  have  endured  the  awful  suf- 
fering in  their  effort  to  reach  the  North  Pole, 
no  man  has  been  actuated  to  the  frightful 
task  by  any  hope  that  beyond  those  barriers 
there  was  a  land  where  conditions  for  living 
would  be  an  improvement  over  lands  easily 
accessible  to  him  and  without  privations  of 
any  kind.  All  may  have  been  encouraged 
by  the  hope  that,  if  successful,  they  would  re- 
ceive the  plaudits  of  their  fellow-men;  that 
their  names  would  be  sent  down  the  ages  on 
the  recorded  pages  of  time,  along  with  other 
great  discoverers;  but  the  controlling  motive 
of  that  spirit,  which  will  yet  surmount  those 
barriers,  is  the  same  motive  that  has  actuated 
man  in  all  his  struggles  to  reach  a  position  on 
the  heights  of  fame  loftier  than  that  hitherto 
achieved  by  his  fellow-man.  And  the  greater 
the  environments,  the  greater  the  determina- 
tion to  surmount  them.  Man  feels  it  to  be  his 
natural  right  to  possess  himself  of  anything 
that  his  judgment  tells  him  it  would  be  to  his 
benefit  to  have.  Education  and  association 
have  taught  him  that  his  right  to  possess  that 


54  FREE  BANKING. 

which  his  heart  desires,  must  be  Hmited  to  the 
possession  of  those  things  that  do  not  rob  his 
fellow-man  of  a  possession.  Hence,  man  has 
a  natural  right  to  anything  attainable  by  him 
not  the  possession  of  some  other  man. 

It  is  readily  assumable,  therefore,  that  the 
North  Pole  belongs  to  no  man.  Neither  does 
trade  belong  to  any  one  man.  The  right  to 
trade  justly  with  his  fellow-men,  in  a  manner 
commonly  agreed  upon,  to  buy  in  the  cheap- 
est and  to  sell  in  the  dearest  markets  is  man's 
natural  right,  and  any  restriction  by  govern- 
ment of  those  natural  rights  will  be  resisted 
by  him.  He  will  do  it  openly  if  he  believe  it 
to  be  to  his  interest  to  do  so;  secretly,  if  that 
method  be  to  his  advantage.  His  condition  in 
life  may  be  pleasant,  his  respect  for  law  deep- 
seated,  and  his  temptation  to  infract  the  law 
be  slight.  In  the  last  case  he  may  even  obey 
a  law  the  enforcement  of  which  would  have  no 
bearing  upon  his  condition  in  life.  But  as 
soon  as  he  feels  that  the  enforcement  of  such 
a  law  is  a  disadvantage  to  him  and  restricts 
him  in  the  exercise  of  his  natural  rights,  he 
becomes,  to  a  greater  or  less  extent,  discon- 
tented, and  his  respect  for  law  will  be  measur- 
ably decreased;  and  too  frequently  it  becomes 
so  decreased  that  his  respect  for  law  will  be 
changed  to  a  contempt  for  law. 

The  only  hope,  then,  for  the  permanency  of 


FREE  BANKING.  55 

constitutional  government  rests  on  the  respect 
of  its  citizens  for  the  law.  And  in  their  belief 
in  the  justice  of  the  law,  so  long  as  a  law  re- 
mains in  the  statutes  of  the  country,  the 
abridgment  of  any  natural  right  of  man  by 
the  laws  of  such  government  becomes  a  men- 
ace to  the  permanency  of  that  government. 

Perhaps  no  set  of  legislators,  either  of 
the  States  or  of  the  Nation,  could  serve 
their  countrymen  in  any  way  better  than 
by  devoting  the  entire  time  of  a  term 
of  such  an  office  in  efforts  to  repeal  laws. 
The  country  can  well  afford  to  get  on 
for  a  few  years  without  new  legislation, 
much  as  new  legislation  is  needed,  if  it  can 
thereby  get  rid  of  those  pernicious  laws  that 
restrict  its  citizens  from  the  exercise  of  natural 
rights. 

Man's  most  important  and  most  restricted 
natural  right  is  to  trade  with  his  fellow-man 
and  fellow-men  in  any  way,  and  with  the  use 
of  any  convenience,  that  those  immediately 
interested  may  commonly  agree  upon,  so  long 
as  the  methods  and  the  conveniences  do  not 
deprive  any  persons  of  their  natural  rights. 

This  is  the  particular  natural  right  of  man 
that  the  government  of  civilization  has  most 
restricted.  And  from  that  persistent  and  per- 
nicious interference  with  the  conveniences  of 
exchange  by  nearly  all  the  governments  of 


5 6  FREE  BANKING, 

the  world  durinig  the  past  two  hundred  years, 
and  by  the  Latin  nations  for  upward  of  two 
thousand  years,  has  come  the  greater  part  of 
that  degrading  poverty  that  has  ever  increased 
in  degradation  and  extent  as  arts,  science,  and 
the  industries  have  been  developed. 

By  the  study  of  the  experience  of  com- 
mercial nations  the  political  economist  formu- 
lates economic  laws.  Gresham's  law  was 
formulated  by  that  financier  and  economist, 
from  whom  it  takes  its  name,  after  years  of 
patient  study  of  the  effect  of  the  debased 
money  of  England  upon  the  money  not 
debased. 

But  to  establish  a  proposition  in  economics 
into  a  law  of  economics  by  study  of  conditions 
is  not  possible,  unless  those  conditions  can  be 
sustained  as  a  logical  sequence.  If  the  ex- 
perience of  most  of  the  progressive  nations 
were  to  be  accepted  as  establishing  economical 
laws,  a  law  might  readily  be  formulated  that 
the  experiences  of  nations  would  sustain,  to 
the  efifect:  "That  in  proportion  as  nations  in- 
crease in  wealth  and  refinement,  poverty  and 
crime  increase,  and  virtue  and  honesty  de- 
crease." It  is  not  necessary  to  waste  time  in 
attempting  to  prove  that  such  a  preposterous 
proposition  is  not  a  law  of  nature.  It  is  so 
absurd  that  the  dullest  of  human  minds  will 
by  intuition  know  it  to  be  illogical,  and  conse- 


FREE  BANKING.  57 

qiiently  not  a  law  of  anything,  but  rather  a 
result  of  the  application  by  the  controlling 
nations  of  the  world  of  injustice  and  disregard 
of  natural  laws  to  the  methods  of  government. 
And  in  no  other  way  is  this  injustice  and  dis- 
regard of  natural  laws  more  flagrantly  en- 
forced than  in  the  governmental  control  of  the 
monetary  affairs  of  the  people. 

Under  the  freest  banking  system  ever  en- 
joyed by  the  people  of  the  United  States,  the 
number  of  paupers  and  criminals  in  the  coun- 
try was  scarcely  a  disturbing  factor,  being 
less  than  two  hundred  and  fifty  to  each 
one  hundred  thousand  of  its  population. 
Under  the  supposed  improved  banking 
laws  that  now  control  our  monetary  sys- 
tem, the  number  of  paupers  and  criminals 
to  each  one  hundred  thousand  of  our 
population  has  increased  to  upward  of 
three  thousand,  and,  in  addition  to  this 
charge  upon  the  public,  upward  of  a  mil- 
lion of  our  people  are  honorary  pensioners  of 
Government. 

Under  the  free  banking  system  the  tramp 
was  unknown. 

Under  the  improvements  that  the  ablest  and 
most  disinterested  class  of  our  fellow-citizens, 
the  experts  in  banking  laws,  have  been  able  to 
devise,  the  army  of  tramps  have  so  increased 
that  there  is  scarcely  a  highway  in  the  United 


58  FREE  BANKING. 

States  that  is  not  in  use  by  them.  And  these 
tramps  are  not  enumerated  either  as  paupers 
or  criminals,  unless  they  have  been  either  in- 
mates of  jails  or  of  almshouses.  Their  pres- 
ence, moreover,  is  a  menace  both  to  person 
and  property,  and  the  unprotected  females  on 
almost  any  of  the  highways  of  the  land  are 
more  fearful  of  them  than  of  savag-e  beasts. 
The  tramp  is  not  a  seilf-invented,  self-devel- 
oped, self-made  brute;  he  is  an  evolution,  and 
society  is  responsible  for  his  brutalization,  and 
the  monetary  laws  of  civilization  have  had  the 
greater  part  in  that  evolution.  The  criminals, 
too,  are  largely  the  products  of  bad  legislation. 

Who  are  the  paupers?  They  are  mostly  of 
that  class  who  are  too  honest  to  steal,  and  not 
intellectually  or  physically  strong  enough  to 
win  their  own  support  in  the  struggle  for  ex- 
istence. They  yield  to  what  they  believe  to 
be  the  inevitable;  surrender  their  liberty,  and 
voluntarily  seek  the  imprisonment  of  the  alms- 
house that  they  may  be  sheltered. 

Against  what?  The  injustice  of  existing 
laws. 

Several  of  the  almshouses  of  our  country 
prove  the  truth  of  this  proposition  in  being 
made  self-sustaining  by  the  united  labor  of 
their  inmates.  Sussex  County,  Delaware, 
was  at  one  time  in  its  history  swept  by  the 
waters  of  the  ocean.     By  ages  of  unceasing 


FREE  BANKING.  59 

energy  of  the  sea  a  sand  bar  was  formed,  that 
in  time  emerged  from  the  ocean  and  became 
covered  with  vegetation.  Its  soil  is  thin  and 
offers  no  seductive  encouragement  to  the  agri- 
culturist. Yet  by  cultivation,  aided  by  fair 
intelligence,  and  without  exhausting  labor, 
man  in  that  county  may  make  for  himself  a 
dehghtful  existence. 

In  one  of  the  poorest  sections  of  that  county 
is  located  the  "  poor  farm,"  which  contains 
about  two  hundred  acres  of  land,  upon  which 
is  situated  the  almshouse  of  the  county.  The 
population  of  the  county  is  about  forty  thou- 
sand souls.  Land  is  cheap  and  more  accessi- 
ble to  its  people  than  land  in  sections  of  the 
country  where  Nature  makes  it  much  easier 
for  the  agriculturist  to  produce  his  require- 
ments. It  offers  but  little  inducement  to  the 
land  speculator.  This  probably  explains  the 
fact  that  but  forty-one  of  its  inhabitants  sur- 
rendered their  personal  liberty  and  volun- 
tarily were  inmates  of  the  almshouse  last  year. 

Certainly  those  forty-one  paupers  in  the 
Sussex  County  almshouse  cannot  be  possessed 
of  greater  energy  and  intellect  than  the 
average  denizens  of  the  poorhouscs  of  our 
country.  It  is  fair  to  assume  that  their 
energy  and  intelligence  are  below  the  average ; 
nevertheless,  by  the  wise  management  of  that 
almshouse,    those    paupers    were    given    an 


6o  FREE  BANKING. 

Opportunity  to  labor  and  produce,  by  cultivat- 
ing the  land  of  the  poor  farm.  The  result  is, 
they  ceased  to  be  paupers  and  became  worthy, 
self-sustaining  people. 

The  Sussex  County  Almshouse  in  1895  was 
not  only  self-sustaining,  but  returned  a  profit 
to  the  county — the  result  of  the  labors  of  its 
inmates.  Upon  that  farm  were  grown  those 
commodities  that  could  be  produced  upon  it, 
not  only  more  than  enough  for  the  wants  of 
the  inmates,  but  the  sale  of  the  surplus  was 
enough  to  purchase  other  requirements,  and 
make  a  profit  for  the  county  besides.  Those 
forty-one  people  in  that  almshouse  are  no 
longer  paupers,  but  honorable  and  valuable 
residents  of  the  State  of  Delaware. 

There  is  no  reason  to  doubt  that  if  the  same 
wise  methods  of  giving  opportunities  to  labor 
and  to  produce  were  also  given  to  the  inmates 
of  all  the  almshouses  of  our  land,  and  of  all 
other  lands,  all  the  almshouses  would  become 
self-sustaining,  and  the  inmates  of  such  insti- 
tutions would  cease  to  become  paupers,  but 
would,  on  the  contrary,  become  serviceable 
members  of  society. 

And  if  to  the  people  of  all  countries  were 
given  free  access  to  uncultivated  lands,  pov- 
erty would  disappear  from  the  civilized  world 
and  almsliouses  and  charitable  institutions 
would  be  things  of  the  past  in  civilized  com- 


FREE  BANKING.  6 1 

munities,  or  would  remain  only  as  curios  or 
as  monumental  relics  of  a  past  barbarism. 

There  surely  is  a  monstrous  injustice  some- 
where in  the  system  that  robs  man  of  his 
natural  rights  to  produce  those  commodities 
necessary  for  his  existence;  and  as  man's 
genius  harnesses  to  his  will  newly  discovered 
forces  of  nature  and  increases  the  capacity 
of  man  to  produce,  that  injustice  is  intensified 
when  the  methods  adopted  reduce  the  oppor- 
tunities of  one  set  of  men  to  produce  for 
themselves. 

If  poverty  and  crime  are  increased  as  a  con- 
sequence of  man's  inventive  genius,  it  must 
necessarily,  then,  follow  that  the  man  who  dis- 
covers new  forces  in  nature,  and  invents  appli- 
ances by  which  man's  individual  power  to 
produce  is  increased,  is  a  curse  to  most  of  his 
fellow-men,  and  so,  instead  of  encouraging 
mechanical  invention,  it  should  be  dis- 
couraged. It  is  unthinkable,  however,  that, 
Franklin,  Fulton,  Evans,  Whitney,  Morse, 
Ericsson,  Edison,  and  men  of  their  character 
and  mental  force  can  be  considered  otherwise 
than  blessings  to  their  countrymen. 

It  is  not  because  man's  inventive  genius  has 
vastly  enlarged  man's  capacity  to  produce  his 
wants  that  poverty  and  crime  increase;  it  is 
because  of  bad  government.  We  have  en- 
tirely too  much  paternalism  in  governments. 


62  FREE  BANKING. 

Man  cannot  be  too  free,  he  cannot  indulge  in 
too  much  individuaHsm,  so  long  as  he  respects 
another  man's  rights.  Education  teaches  re- 
spect for  others'  rights;  not  by  artificial  laws  is 
man  taught  to  respect  them.  No  man  can 
claim  as  a  just  right  any  individual  right  that 
gives  him  a  monopoly  of  a  natural  opportu- 
nity. That  which  nature  has  created  without 
the  aid  of  man  any  man  has  a  natural  right  to, 
in  common  with  his  fellow-men.  When  pos- 
sessing more  of  such  opportunities  than  he 
can  make  available  for  his  comforts  and  neces- 
sities, he  robs  his  fellow-men  when  he  denies 
to  them  access  to  that  part  of  a  natural  oppor- 
tunity that  he  cannot  himself  make  use  of. 

It  is  the  "  dog  in  the  manger  "  that  causes 
poverty  and  crime:  in  his  freedom  to  trade 
with  his  fellow-men,  in  whatever  manner  that 
those  who  do  the  trading  may  agree  upon, 
man  should  be  unrestricted.  If  A  is  indebted 
to  B  to  the  amount  of  twenty-five  dollars, 
he  should  not  be  restricted  in  his  right  to  pay 
that  indebtedness  by  creating  a  new  one.  He 
should  be  permitted,  if  B  is  willing  to  take 
such  payment,  to  make  five  or  more  notes 
payable  on  demand.  It  is  no  one's  business 
but  that  of  A  and  B.  B  may  owe  other 
men  who  will  willingly  take  A's  note  in  pay- 
ment of  his  debts,  and  those  to  whom  B  makes 
such  payments  would  find  their  creditors  will- 


FREE  BANKING.  63 

ing  to  take  A's  note,  and  possibly,  after  a 
time,  A's  notjes  would  be  returned  to  him  in 
payment  of  amounts  due  A. 

These  notes  of  A's  could  not  be  thus  circu- 
lated as  a  currency,  unless  those  who  took 
them   had   faith   in   the   integrity   and   sound 
business   methods   of   A.     When   a   paternal 
government  prohibits   the   use  of   such   cur- 
rency, because  of  the  fear  that  some  innocent 
or  ignorant  holder  of  such  notes  will  possibly 
be  a  loser  by  using  such  currency,  that  gov- 
ernment stands  upon  a  par  in  intellectual  de- 
velopment with  that  parent  who   refuses  to 
take  the  necessary  health-restoring  drug  into 
his  house  because  of  his  fear  that  some  of  his 
innocent  and  ignorant  children  will  get  a  part 
of  it  and  poison  themselves.     If  any  set  of 
legislators    seriously    contemplate    formulat- 
ing laws  to  prevent  fools  from  doing  foolish 
things,  they  are  themselves  the  fools  against 
whom  such  legislation  should  be  aimed. 


CHAPTER  IV. 

From  Rome  came  the  jurisprudence  that 
now  governs  European  civiHzation.  The 
Roman  system  of  jurisprudence  was  evolved 
from  centuries  of  experimental  efforts  of  the 
governing  class  of  the  Commonwealth  and 
Empire  of  Rome  to  compel  the  great  mass  of 
the  producing  class  there  to  be  human  brutes 
— mere  beasts  of  burden  and  of  toil.  And 
so  effectively  had  the  government  of  Rome 
formulated  and  executed  laws  for  that  pur- 
pose that,  when  the  Empire  reached  its  great- 
est attainments  in  wealth  and  literature,  nearly 
two-thirds  of  its  population  were  slaves. 
Rome  made  no  great  advance  in  either  the 
arts  or  science.  She  built  magnificent 
palaces,  by  calling  to  her  aid  the  skill  and 
genius  of  Greece,  but  it  was  in  war  and 
along  the  avenues  of  destruction  that  she  be- 
came powerful  and  great.  Might  was  the 
foundation  of  Roman  jurisprudence.  No 
soldier  of  Rome  and  but  few  of  her  statesmen 
ever  questioned  the  right  to  possess  anything 
that  might  could  command.  From  such 
64 


FREE  BANKING.  65 

ethical  culture  it  is  not  reasonable  to  assume 
that  a  system  of  perfect  justice  could  evolve. 

Nor  did  it.  To-day  the  foundation  of  the 
system  of  justice  in  every  country  of  civiliza- 
tion is  that  of  might.  Not  the  possession  of  a 
natural  opportunity  held  by  any  mortal  of  to- 
day, if  traced  back  far  enough,  will  fail  to 
reveal  the  blow,  the  force,  and  the  ruthless 
robbery  that  tore  it  from  the  possession  of 
someone  else.  And  doubtless,  if  the  history 
of  the  possession  of  such  an  opportunity  be 
carried  back  far  enough,  it  will  show  that  by 
the  process  of  violence  it  had  frequently 
changed  ownership. 

A  great  Latin  prince,  believing  himself,  and 
also  believed  by  Church  and  State,  to  be  the 
vicar  of  God  on  earth,  incapable  of  doing  an 
injustice,  having  been  forced  by  scientists, 
not  the  development  of  Roman  culture,  to 
accept  the  belief  of  the  rotundity  of  the  globe, 
drew  a  line  across  the  chart  of  the  new  conti- 
nent, the  existence  of  which  had  but  recently 
been  made  known  to  him;  and  to  his  faithful 
subject  the  King  of  Spain  he  said:  "All  that 
is  north  of  the  line — land,  people,  and  wealth — 
I,  as  the  vicar  of  God,  give  to  you,  to  do  with 
as  you  may,  and  all  to  the  south  of  that  line  I 
give  to  my  faithful  subject  the  King  of 
Portugal." 

In  this  simple  transaction  of  a  Pope  whose 


66  FREE  BANKING, 

goodness  of  heart  aiid  nobleness  of  purpose 
are  here  not  questioned,  we  have  a  complete 
illustration  of  Latin  jurisprudence.  If  those 
king's  could  possess  themselves  of  those  lands, 
rob  their  inhabitants  of  their  w^ealth,  and  en- 
slave them,  they  might  justly  do  so,  and  the 
Almighty  God  v^ould  justify,  and  Latin  civili- 
zation and  jurisprudence  would  legalize  the 
transaction.  And  to-day  the  foremost  nations 
of  the  world  recognize  the  binding  force  in 
law  of  that  division  of  a  continent  made  by  a 
man  nearly  four  hundred  years  ago. 

Surely  the  dead  reigns,  and  the  living  bow 
in  obedience  to  a  lump  of  clay.  Fetichism 
among  savage  men  is  a  vice;  among  the  most 
learned,  most  cultivated,  and  most  progressive 
nations  of  the  world  it  is  a  cardinal  virtue. 

And  why?  Because  Roman  jurisprud- 
ence has  declared  it  to  be  so,  and  Thomas 
Jefferson  to  have  been  an  anarchistic  teacher 
when  he  taught  that  the  earth  in  its  usufruct 
belongs  to  the  living,  and  that  the  dead  should 
have  no  control  of  it. 

Under  the  Roman  system  m,en  apparently 
recognized  no  man's  rights  to  anything  that 
could  safely  be  taken  from  him.  If  man  was 
strong  enough  to  retain  what  he  became  pos- 
sessed of,  his  right  to  it  was  recognized.  The 
hero  of  the  Romans  was  not  only  a  robber, 
but  a  fratricide.     He  taught  his  subjects  the 


FREE  BANKING.  67 

art  of  deceit  as  a  necessary  method  of  estab- 
lishing homes,  and  the  history  of  the  nation 
that  he  estabHshed  is  a  history  of  robbery, 
murder,  and  Hcentiousness.  Here  and  there 
in  the  history  of  Rome  are  presented  such 
characters  as  Brutus  and  Lucretia,  but  they 
are  as  oases  in  the  desert. 

Is  it  not  time  for  the  people  of  the  present 
civilization  to  cease  their  fetich  worship  of  un- 
natural things?  For  ages  men  have  been 
submitting  themselves  to  horrible  torture, 
mutilating  their  bodies  and  dwarfing  their 
intellects  to  appease  the  wrath  of  undiscern- 
ible  and  unknown  demons;  but  those  ages  of 
human  torture  do  not  prove  the  existence  of 
the  demons.  No  more  do  the  system  of  laws 
of  some  kinds  of  civilization^ — in  spite  of  the 
indorsement  of  ages — prove  that  such  laws  are 
founded  on  justice. 

Modern  intelligence  has  eliminated  from 
civilization  the  worship  of  snakes,  serpents, 
cats,  and  other  living  things.  It  has  de- 
stroyed the  faith  of  educated  people  in  demons, 
witches,  and  such  uncanny  creatures.  But  in- 
telligence has  much  more  to  do  to  remove 
fetich  impediments  from  the  pathways  of  hu- 
man progress.  So  long  as  the  human  mind 
accepts  the  proposition  that  because  humanity 
has  for  ages  believed  to  be  true  an  economic 
or  ethical  proposition,  and  that  those  many 


68  FREE  BANKING. 

years  of  humanity's  faith  in  the  correctness  of 
the  proposition  is  conclusive  evidence  of  its 
truth,  so  long  does  that  human  mind  need  fur- 
ther education  and  development. 

There  are  certain  propositions  the  truth  of 
which  is  so  apparent  to  the  human  mind  that 
w^ords  cannot  be  framed  to  express  the  ideas 
more  comprehensively  to  the  mind  than  by 
merely  stating  the  proposition.  The  geo- 
metrical proposition  that  a  straight  line  is  the 
shortest  distance  between  two  points  cannot, 
for  example,  be  more  clearly  elucidated  than 
by  the  bare  statement  that  ''  The  shortest  dis- 
tance between  two  points  is  a  straight  line." 
Though  a  volume  of  thought  be  devoted  to 
elucidation,  a  mind  incapable  of  accepting 
that  proposition  at  once,  but  demanding 
further  proof  of  its  accuracy,  is  incapable  of 
reasoning,  and  by  its  fellows  such  a  mind 
would  be  deemed  that  of  an  imbecile. 

That  which  man  produces  without  aid  from 
his  fellow-men  should  be  the  property  of  the 
man  who  produces  it,  is  an  axiomatic  truth; 
that  man  has  a  right  to  opportunities  to  live 
upon  earth,  is  equally  true.  Man  is  entitled  to 
possess  whatever  he  may  produce,  so  long  as 
in  the  process  of  production  he  has  not  de- 
prived his  fellow-man  of  anything  that  was  his 
possession.  Man  cannot  rightly  take  for  his 
use  that  which  other  men  possess,  unless  by 


FREE  BANKING.  69 

the  consent  of  the  possessor,  even  though 
he  who  possessed  it  acquired  it  by  unjust 
methods. 

No  arguments  are  needed  to  sustain  the 
truth  of  these  propositions.  They  are  self- 
evident.  Man  should  not  be  permitted  by  his 
fellow-men,  by  society,  by  government  to  re- 
tain possession  of  anything  he  was  not  justly 
entitled  to  possess.  If  it  did  not  belong  to  the 
man,  and  no  owner  for  it  could  be  found,  it 
should  become  the  common  property  of 
society.  This  logical  proposition,  however,  is 
not  sustained  by  Roman  jurisprudence.  By 
that  law  it  remains  the  private  property  of 
the  possessor,  to  be  used  by  him  for  his 
private  purpose,  and  for  its  misuse  he  is 
accountable  only  when  complaint  is  duly 
and  legally  made  by  the  real  owner  of  the 
property. 

If  anyone  will  take  the  trouble  to  investigate 
the  suit  and  the  decision  regarding  it  handed 
down  by  our  highest  courts  of  certain  people 
of  New  York  city  against  the  Old  Dutch 
Church,  to  compel  that  church  to  account  for 
the  use  or  misuse  of  the  old  shoemaker's 
cow  pasture  ''  down  by  the  Maiden  Lane,"  he 
will  see  that  the  highest  courts  declare  that 
persons  holding  illegal  possession  of  property 
cannot  be  disturbed  in  the  possession  of  it,  save 
by  complaint  of  the  real  owner  of  it.     Fetich 


70  FREE  BANKING. 

worship  of  Roman  jurisprudence  makes  an 
anarchist  of  the  man  who  asserts  that  property 
illegally  in  possession  of  individuals,  and  for 
which  real  owners  cannot  be  found,  should  be 
confiscated  for  the  use  of  society.  "  Posses- 
sion is  nine  points  of  the  law."  Justice  may 
hold  one. 

When  the  Great  Master  went  up  to  Jerusa- 
lem preaching  a  new  philosophy,  He  was 
denounced  both  by  Church  and  State  as  an 
anarchistic  teacher.  In  the  beginning  of  His 
work  He  was  simply  the  despised  Nazarene. 
And  the  same  spirit  that  disdainfully  ex- 
claimed in  the  last  Presidential  contest, 
*' What  do  the  hayseeds  know  of  finance?" 
lived,  clothed  in  purple  and  fine  linen  or  in 
SLcerdotal  robes,  in  Jerusalem  upward  of 
nineteen  centuries  ago,  and  disdainfully  asked 
the  question,  ''  What  good  ever  came  out  of 
Nazareth?  "  The  Master  taught  a  simple  phi- 
losophy. One  so  easily  comprehended  that 
any  mind  not  indurated  by  selfish  injustice 
or  Roman  jurisprudence  could  comprehend 
and  understand  it.  The  whole  philosophy  of 
Christ's  teaching  was  epitomized  in  His  in- 
junction to  His  followers,  *'  Do  unto  others  as 
you  would  have  others  do  unto  you."  The 
man  who  desires  special  privileges  to  trade 
cannot  be  wise  and  honest  according  to  the 
Master's  standard. 


FREE  BANKING.  7^ 

If  wise,  he  knows  full  well  that  he  can  pos- 
sess and  make  use  of  no  special  privileges  to 
trade  that  will  admit  of  him  doing  "  unto 
others  as  he  would  have  others  do  unto  him." 
If  he  be  wise  and  asks  for  special  privileges, 
he  intends  to  get  more  than  an  equivalent  for 
w^hat  he  intends  to  give,  as  it  is  his  in- 
tention that  his  fellow-men  shall,  by  their 
necessities,  be  compelled  to  give  him  more 
than  an  equivalent  for  what  he  gives 
them.  If  he  be  wise,  and  seeks  to  pos- 
sess any  of  these  special  privileges,  he  is 
not  honest  if  he  pretends  to  Christian  virtues. 
By  the  standard  of  Lycurgus  he  would  be 
honest,  provided  he  could  conceal  the  method 
by  which  he  got  the  better  of  his  fellow-men 
in  the  deal.  By  the  Roman  standard  he 
would  be  both  honest  and  honored  if  he  could 
retain  possession  of  what  he  got,  no  matter  by 
what  means. 

But  the  pretended  basis  of  justice  in  the 
United  States  is  Christ's  philosophy.  Equity 
is  presumably  based  upon  Christ's  teachings. 
The  exponents  of  law  to-day  should  be  as 
wise  as  those  of  any  preceding  period  of  the 
world's  history.  It  is  even  a  fair  assumption 
to  say  that  they  should  be  wiser.  They  know 
that  when  the  Romans  accepted  Christianity 
as  a  state  religion,  they  modified  that  religion 
to  accord  with  Roman  thought,  to  such  an  ex- 


72  FREE  BANKING. 

tent  as  almost  to  destroy  its  resemblance  to 
the  religion  taught  by  the  Apostles;  they  know 
that  Rome  accepted  Christian  precepts.  The 
Christian  nations  of  to-day,  not  even  except- 
ing those  under  the  full  sway  of  the  Roman 
Church,  no  longer  teach  the  religion  of  Con- 
stantine,  but  that  of  the  Apostles,  as  the  cor- 
rect foundation  for  the  ethics  of  our  daily  lives. 
All,  however,  in  their  political  and  economic 
systems,  cling  to  the  traditions  of  Constantine 
and  his  successors,  as  their  reverence  for  the 
Justinian  code  proves. 

No  better  real  estate  title  is  held  in  England 
to-day  than  those  of  tbe  monastery  lands  of 
that  country  that  Henry  VIIL,  asserting  abso- 
lutely his  own  free  will,  took  violent  possession 
of,  and  bestowed  upon  those  whom  he  sought 
to  reward  for  personal  service.  Had  Henry 
been  what  he  claimed  to  be, — the  personifica- 
tion of  the  people  of  England, — and  taken  vio- 
lent possession  of  those  lands  for  the  benefit  of 
the  whole  people  of  England,  there  might  have 
been  some  justification  in  the  philosophy  Oi 
Christ  for  such  confiscation.  It  is  very  proba- 
ble that  Henry  really  believed  that  all  his  acts 
in  that  direction,  both  in  the  robbery  and  in 
the  distribution  of  the  plunder,  were  for  the 
best  interest  of  all  England.  But  because  he 
believed  so,  and  a  division  of  the  Christian 
Church  and  the  courts  of  England,  as  he  had 


FREE  BANKING.  73 

organized  them,  sustained  him  in  that  belief, 
is  no  reason  why  those  of  the  present  genera- 
tion should  believe  it.  He  had  no  more  right 
to  limit  the  freedom  of  opportunity  that  those 
lands  afforded — even  with  the  indorsement  of 
every  man  in  England — to  the  generation 
that  was  to  follow,  than  he  had  to  declare 
that  no  man  born  in  England  after  his  death 
should  ever  wear  a  coat,  or  leave  the  country. 
Surely  it  is  the  dust  of  the  dead  that  most 
oppresses  mankind,  and  ancestral  worship  too 
greatly  prevails  in  the  halls  of  justice. 

An  ethical  system  that  turned  Europe  from 
an  advanced  stage  of  enlightenment  into  a 
charnel  house  of  free  thought,  and  plunged  it 
for  nearly  a  thousand  years  into  darkness  and 
decay,  from  which  it  was  rescued  only  by  ex- 
ternal pressure,  is  a  system  well  worth  aban- 
doning; and  it  would  have  long  since  been 
abandoned  had  not  civilized  man  been  pre- 
eminently a  conservative  animal. 

Give  any  man  a  happy  home  and  ease,  and 
he  is  likely  to  rest  contented  with  what  he  has, 
and  frown  upon  any  proposition  that  may  dis- 
turb his  enjoyments.  That  is  the  artificial 
man.  Most  civilized  men's  natures  are  arti- 
ficial— the  creation  of  their  environments. 
So  long  has  man  been  oppressed  by  tradition 
that  most  men  easily  learn  even  to  question 
the  proposition  that  they  have  a  right  to  live; 


74  FREE  BANKING. 

they  readily  accept  the  behef  that  they  can 
only  live  by  the  consent  of  the  divinely  an- 
ointed, or  heavenly  appointed  of  their  fellows. 
When  a  happy  home  and  an  easy  existence 
become  his  share  of  this  world's  gifts,  man  is 
too  anxious  to  retain  them  to  consent  to  any 
radical  departure  from  the  traditions  of  the 
fathers,  from  whom  he  believes  he  may  have 
become  possessed  of  those  good  things. 
Hence  it  follows  that  no  radical  reformation 
of  economic  systems  may  be  expected  to 
originate  or  be  effected  by  those  who  possess 
the  wealth  of  the  country.  Selfishness,  con- 
tentment, and  ignorance — allies  in  the  main- 
tenance of  governmental  monopolies — have 
rarely  failed  to  maintain  their  supremacy. 
The  most  powerful  factor  for  evil  in  this  alli- 
ance is  that  of  ignorance.  It  can  generally  be 
depended  upon  as  an  all-powerful  reserve. 
The  *'  men  who  think  that  they  think  "  are 
perhaps  the  most  dangerous  of  the  ignorant 
class.  This  class  is  largely  composed  of  well- 
dressed,  well-preserved  men,  who  know  some- 
thing of  the  art  of  making  money  and  of 
polite  society,  who  consider  it  rather  vulgar 
to  be  in  "  politics,"  whose  reading  of  political 
literature  is  restricted  to  the  limits  of  a  very 
partisan  but  eminently  refined  newspaper,  the 
tone  of  which  harmonizes  with  what  they  be- 
lieve to  be  their  own  really  intelligent  politi- 


FREE  BANKING.  75 

cal  convictions,  but  which  more  nearly 
resemble  a  fetichism. 

To  many  such  men  gold  and  silver  are 
money,  whether  in  the  form  of  bullion  or  of 
coin.  They  believe  that,  in  the  limitless  ages 
that  have  passed,  God  made  those  metals  that 
man  might  have  money.  Some  of  this  class 
of  men  who  "  thought  that  they  thought " 
have  had  a  hard  rap  on  their  brains  in  the  last 
twenty  years  by  the  odd  freaks  in  which  sil- 
ver has  been  indulging;  and  they  are  becom- 
ing a  little  skeptical  of  the  theory  that  God 
made  silver  for  man's  money;  and  by  this 
skepticism  many  minds  may  become  emanci- 
pated from  the  fetichism  that  gold  and  silver 
are  natural  money. 

'  A  worthy  gentleman,  twice  elected  by  a 
most  complimentary  vote  Governor  of  one 
of  the  Pacific  States,  wrote,  a  few  years  ago, 
for  one  of  the  popular  monthlies,  an  article 
on  money,  in  which,  with  apparent  serious- 
ness, he  set  forth  the  proposition  that  the 
failure  of  the  gold  and  silver  supply  began  in 
the  third  or  fourth  century  of  the  Christian 
era,  and,  continuing  until  a  beneficent  provi- 
dence most  mercifully  guided  Columbus  to 
the  New  World  and  new  supplies,  was  the  real 
cause  of  the  decadence  of  Europe  during  those 
centuries.  And  the  discovery  of  vast  deposits 
of   silver   and    gold   in    accessible   places    in 


76  FREE  BANKING. 

America  was,  he  said,  the  cause  of  the  rapid 
intellectual  development  of  Europe  during  the 
last  four  centuries. 

Was  that  Governor  a  wise  man,  or  should 
he  be  classed  among  the  ignorant  allies  who  so 
valiantly  and, alas!  so  successfully  support  gov- 
ernmental monopolies?  Evidently  this  man 
had  no  intelligent  conception  of  the  greatness 
of  the  Venetian  republic,  nor  knew  anything 
of  the  mighty  commerce  and  trade  promoted 
by  the  Bank  of  Venice  without  the  assistance 
of  an  ounce  of  gold  or  silver  money;  promoted 
simply  on  the  basis  of  the  credit  that  men 
might  inspire  who  possess  honesty,  good  busi- 
ness methods,  with  other  forms  of  wealth, 
other  than  that  of  gold  or  silver  money;  a 
banking  system  in  which  honesty,  sobriety,  in- 
dustry, and  business  capabilities  were  more 
desirable  securities  than  gold  or  silver. 


CHAPTER  V. 

The  use  of  money  became  a  necessity  to 
man  when,  in  his  onward  progress,  he  passed 
beyond  a  certain  stage  of  barbarism  into  the 
Hmits  of  civihzation.  And  in  hke  manner  did 
textile  fabrics.  Gold  and  silver  were  made 
use  of  for  the  purpose  of  expediting  ex- 
changes, and  became  money,  or  rather  that 
portion  of  those  metals  became  money  that 
was  made  use  of  solely  for  purposes  of  ex- 
pediting exchange. 

But  textile  fabrics,  in  certain  countries  and 
at  certain  stages  of  civilization,  were  also  used 
for  the  purpose  of  expediting  exchanges,  and 
that  part  of  such  textile  fabrics  used  for  that 
purpose  became  money.  As  money  they  were 
also  commodities. 

Gold,  silver,  and  textile  fabrics  were  all  com- 
modities. The  eternal  ages  cannot  change 
them  from  their  position  as  commodities; 
although  it  is  possible  that  all  of  them  may 
cease  to  be  used  as  money,  or  as  the  basis  of 
money.  They  would  never  have  been  used 
as  money  had  they  possessed  no  commodity 

77 


78  FREE  BANKING. 

value.  They  would  not  have  been  used  as 
money  if  the  use  of  them  as  money  had  de- 
stroyed their  commodity  value.  Their  value 
as  money  was  only  at  par  with  their  com- 
modity value. 

Gold  and  silver  money  must  be  in  the  future 
what  it  has  always  been  in  the  past — commod- 
ities only.  Money  made  from  those  metals  or 
from  any  other  metal  is  now,  always  has  been, 
and  always  will  be,  considered  by  commer- 
cial operators  as  commodities.  Their  value  is 
not  ascertained  by  the  ciphers  stamped  upon 
them,  but  by  weight,  and  by  the  assayer. 

By  the  Bank  of  England  the  value  of  a  de- 
posit of  gold  sovereigns  is  not  determined  by 
counting,  but  by  weighing.  Surely,  at  the 
Bank  of  England  the  gold  sovereign  is  not 
considered  as  money.  A  like  weight  of  gold 
bars  of  the  same  fineness,  and  coined  gold 
sovereigns  are  accepted  for  exactly  the  same 
value  by  that  Bank.  The  fact  that  a  pound 
of  gold  has  been  coined  by  the  authority  of 
England  adds  nothing  to  its  bullion  value. 
The  notes  of  the  Bank  of  England  might 
be  termed  money,  but  not  commodity,  if 
they  were  not  exchangeable  at  the  will 
of  the  holder  into  gold  or  other  commod- 
ities of  equal  value.  This  exchangeability 
of  the  notes  of  the  Bank  of  England  makes 
commodities  of  them  as  absolutely  as  the  arti- 


FREE  BANKING.  79 

cles  that  they  buy  are  commodities,  and  so 
must  all  other  governmental  or  private  bills 
issued  for  the  purpose  of  money  be  classed  as 
commodities.  They  who  exchange  cloth  for 
Bank  of  England  notes  buy  those  notes. 
Money  is  as  much  a  commodity  as  is 
the  article  it  buys.  If  the  dealers  in 
money  be  put  in  possession  of  power  to 
control  the  issue  of  money,  they  possess 
a  power  to  oppress  the  users  of  money  that 
should  not  be  given  to  them.  As  long  as 
the  money-dealers  possess  this  power — to  a 
limited  or  an  unlimited  extent — they  create  in 
the  popular  mind  a  distrust  that  any  unusual 
commercial  disorder  is  almost  sure  to  in- 
tensify. As  the  basis  of  the  world's  money  is 
gold,  a  commercial  disturbance  of  any  great 
magnitude  in  any  part  of  the  world  creates, 
among  all  the  people  of  the  commercial  world, 
distrust  in  their  ability  to  exchange  the  prod- 
ucts of  their  labor  for  an  amount  of  money 
that  will  compensate  them  for  the  cost  of  pro- 
duction. 

This  distrust  is  at  once  an  incentive  for 
those  who  have  money  convertible  at  their 
option  into  gold,  to  hoard  their  money,  which 
at  once  creates  a  scarcity  of  it  and  a  greater 
disturbance  of  business.  Gold,  being  a  basis 
of  money  that  has  already  been  hoarded,  is, 
for  the  purposes  of  its  daily  businiess,  practi- 


So  FREE  BANKING. 

cally  useless  to  the  commercial  world.  If  the 
monetary  system  be  inflexible, — and  that  is 
practically  the  case  with  the  world's  money  at 
the  present  time, — those  who  possess  great 
wealth  immediately  proceed  to  conserve  their 
holdings  at  all  times  of  business  disturbances, 
by  drawing  their  lines  of  ventures  to  the  safest 
possible  contraction.  The  first  called  upon  to 
liquidate  their  indebtedness  are  the  weaker 
members  of  the  business  men  of  the  country, 
the  ones  who  really  need  and  should  have  the 
greatest  support.  The  money-dealers  at  such 
times  are  critical  about  the  character  of  their 
credits,  and  seek  to  reduce  the  limit  of  that 
credit  to  circles  where  their  personal  knowl- 
edge may  better  serve  the  safety  of  their  invest- 
ments. Money-dealers,  as  a  class,  live  in  the 
great  money  business-centers  in  the  great 
cities;  and  it  is  but  natural  that  they  should 
limit  their  lines  of  credit  on  occasions  of  com- 
mercial disturbances  to  the  vicinity  of  their 
home  city.  The  weaker  communities  are  as 
much  depressed  and  disturbed  by  the  business 
disturbance  that  was  the  primary  cause  of  the 
distrust,  as  the  wealthy  communities  are,  and, 
in  addition  to  this  general  disturbance,  a  de- 
mand is  made  upon  them  to  pay  at  once,  or  at 
short  time,  obligations  that  they  would  not 
have  been  called  upon  to  pay,  and  were  not  ex- 
pected to  pay,  until  a  much  later  date;  but 


FREE  BANKING.  8l 

would  have  had  simply  to  pay  interest 
thereon. 

This  power  of  the  money-lender,  without 
any  sordid  or  selfish  motive  on  the  part  of 
but  few  of  them, — strictly -following  a  neces- 
sity of  business  only,  or  what  they  are  justified 
in  esteeming  a  business  necessity, — has  had 
more  to  do,  during  the  past  fifty  years,  with 
building  up  great  cities  and  with  prostrating 
small  communities  than  any  other  one  eco- 
nomic factor  has  had. 

When  a  government,  by  the  exercise  of  the 
natural  rights  of  its  people,  institutes  a  mone- 
tary system  that  prevents  any  substitute  for 
money,  it  institutes  a  monetary  system  that  is 
absolutely  inflexible.  If  there  is  any  one  fea- 
ture of  the  money  question  that  bankers, 
financiers,  and  business  men  do  agree  upon, 
it  is  that  a  currency  system  to  be  perfect 
must  provide  for  a  flexible  currency;  a  cur- 
rency that,  in  regard  to  quantity,  will  adjust 
itself  to  the  requirements  of  the  various  com- 
munities of  that  country. 

Many  of  our  serious  statesmen,  who  have 
been  chosen  by  their  fellow-men  to  legislate 
for  them  in  Congress,  have  been  enervating 
their  mental  forces  by  attempting  to  formulate 
a  monetary  system  by  which  the  Government 
should  supply  sufficiently  large  paper  issues  of 
money  to  preclude  the  possibility  of  any  in- 


82  FREE   BANKING. 

dustrial  section  of  the  country  from  ever  being 
without  a  sufficient  supply  of  currency.  But 
so  long  as  they  confine  their  efforts  to  a  sys- 
tem that  provides  for  confining  the  issuing  of 
paper  money  exclusively  to  the  Government, 
or  to  government  control,  they  seek  after  the 
unattainable.  It  would  be  fully  as  wise,  if  not 
wiser,  were  they  to  devote  their  mental  forces 
to  devise  some  plan  by  w^hich  the  Gov- 
ernment could  control  the  output  of  wheat, 
corn,  cotton,  and  other  commodities  quite  as 
important  in  commercial  and  industrial  enter- 
prises as  money.  They  would  succeed  in  es- 
tablishing a  more  perfect  plan  of  promoting 
the  happiness  of  the  whole  people,  if  they 
could  formulate  laws  that  would  compel  every 
man  to  do  his  share  of  the  labor  of  producing 
those  commodities  necessary  to  the  comfort 
and  happiness  of  the  people  of  our  country, 
and  secure  to  each  man  a  just  reward  for  his 
labor. 

To  provide  a  satisfactory  currency  exclu- 
sively by  governmental  issue,  that  will  ad- 
just itself  to  the  requirement  of  all  parts  of  the 
country  at  all  times,  is  far  more  difficult  than 
that  of  controlling  the  productions  of  com- 
modities or  to  control  the  energy  of  the  coun- 
try. No  sane  man  would  propose  that  a 
government  should  control  energy  or  the  pro- 
duction of  commodities,  and  it  is  difficult  to 


FREE  BANKING.  83 

determine  why  any  sane  man  should  advocate 
the  control,  by  the  Government,  of  the  volume 
of  currency  to  be  used.  The  function  of  gov- 
ernment should  be  limited  to  coining  a  stand- 
ard by  which  exchange  may  be  expedited,  to 
fix  a  standard  of  weight  by  which  certain  com- 
modities may  expeditiously  be  exchanged  for 
others,  and  to  establish  a  standard  of  meas- 
ures for  the  convenience  of  trading  in  such 
commodities  that  custom  and  convenience 
may  demand. 

Why  should  the  Government  control  the 
quality  and  quantity  of  currency-issue  any 
more  than  it  should  control  the  quality  and 
quantity  of  cotton  produced?  Men  may  be 
deceived  into  buying  worthless  cotton  as 
readily  as  they  may  be  deceived  into  buying 
worthless  currency.  They  honestly  get  pos- 
session of  each  only  by  purchase  or  produc- 
tion. Education  and  the  police  powers  of 
government,  rightly  directed,  are  capable  of 
preventing  serious  disasters  from  afflicting  the 
public  from  deceit,  either  from  the  owners 
of  worthless  currency  or  worthless  cotton. 

Three  great  political  parties  of  the  United 
States  held  conventions  in  1896,  to  formulate 
political  principles  and  to  nominate  candidates 
for  President  and  Vice  President.  The  first 
convention  to  assemble,  that  of  the  Republi- 
can party,  declared,  "  All  our  silver  and  paper 


84  FREE  BANKING. 

money  must  be  maintained  at  parity  with  gold, 
and  we  favor  all  measures  designed  to  main- 
tain inviolable  the  obligations  of  the  United 
States  and  all  our  money,  whether  coin  or 
paper  money,  at  the  present  standard — the 
standard  of  the  most  enlightened  nations  of 
the  world." 

This  was  a  prettily  worded  resolution,  and 
was  quite  as  sensible  as  another  would  have 
been  that  had  been  made  to  read  that,  *'  All 
the  wheat,  corn,  and  oats  grown  in  the  United 
States  must  be  equal  in  quality  to  the  best 
grown  anywhere  else  in  the  world,  and  we 
pledge  the  solemn  obligations  of  the  United 
States  that  no  man  shall  be  permitted  to  grow, 
buy,  or  sell,  a  bushel  of  wheat,  corn,  or  oats 
that  is  not  equal  in  quality  to  the  best  of  these 
grains  produced  anywhere  in  the  world." 

The  Democratic  convention,  which  met  a 
month  later  in  Chicago,  *'  demanded  free  and 
unlimited  coinage  of  gold  and  silver  at  a  ratio 
of  I  to  i6."  This  might  have  been  a  proper 
demand  in  1872,  but  in  1896,  if  such  a  demand 
could  have  been  enforced,  owing  to  the 
changed  conditions  of  trade  in  the  world,  its 
enforcement  would  have  so  seriously  disturbed 
the  industries  of  the  country  that  it  is  beyond 
man  to  calculate  the  calamity  that  might  have 
resulted  as  a  consequence.  That  the  bullion 
value  of  silver  would  have  advanced  under  the 


FREE  BANKING.  85 

action  of  free  coinage  of  silver  by  the  United 
States,  scarcely  admits  of  a  doubt,  and  it  is 
equally  certain  that  the  purchasing  power  of 
gold  would  have  been  depreciated;  but  that 
they  would  have  finally  settled  to  a  point 
where  the  ratio  of  the  two  metals  would  have 
been  i  to  16,  can  scarcely  be  considered  even 
as  a  possibility.  The  result  would  have  been 
that  we  would  have  had  two  standards:  that 
of  gold,  which  would  be  the  standard  of  meas- 
uring the  value  of  all  commodities  we  import, 
and  that  of  silver,  for  measuring  the  values  of 
all  commodities  we  produce. 

Labor's  reward,  after  a  period  of  readjust- 
ment, would  probably  not  be  much  affected 
by  a  double  standard.  The  wages  of  the 
laborer  under  either  system  would  purchase 
like  quantities  of  commodities.  Labor  gets 
no  more  or  less  commodities  than  labor 
can  command.  The  wages  of  labor  is  ulti- 
mately labor's  products.  Labor  that  com- 
mands the  amount  of  labor's  products  that 
an  ounce  of  gold  will  buy,  will  not  be  con- 
tented with  only  the  amount  of  labor's  prod- 
ucts that  sixteen  ounces  of  silver  will  buy. 

A  change  from  the  gold  to  the  silver  stand- 
ard in  the  United  States  wAW  not  Mexicanize 
the  American  laborer.  It  is  well  known  that 
employers  of  labor  do  not  reward  their  em- 
ployees from  a  sense  of  gratitude   or  from 


86  FREE  BANKING. 

human  sympathy,  but  simply  on  the  purely 
business  principle  of  the  cheapest  markets. 
They  will  pay  as  little  as  they  are  compelled 
to,  and  they  will  employ  labor  only  so  long 
as  they  believe  it  profitable. 

Under  the  system  of  human  justice  prevail- 
ing throughout  the  civilized  world,  members 
of  what  is  known  as  the  laboring  class  are 
compelled  to  a  very  great  extent  to  accept 
those  wages  that  will  give  them  a  barely 
comfortable  existence,  because  of  the  great 
competition  among  them  for  the  privilege  of 
living. 

The  laborers  of  this  country,  especially  in 
the  agrarian  districts,  are  now  about  in  that 
condition,  that  they  cannot  take  less  wages 
and  live.  They  still  have  remaining  some  un- 
monopolized  opportunities.  They  can  fish  in 
the  streams,  hunt  on  the  marshes  and  on  the 
hills,  and  little  patches  of  land  are  generally 
accessible  to  them.  And  when  wages  fall  to 
a  point  where  by  fishing,  hunting,  and  hoeing 
a  man  can  make  a  more  comfortable  exist- 
ence than  by  wage-earning  in  factories,  thou- 
sands avail  themselves  of  the  few  remaining 
free  opportunities  to  work  for  themselves. 
Labor  supply,  then,  becomes  scarce,  and  em- 
ployers of  labor  are  compelled  to  pay  increased 
wages. 

In  countries  where  every  opportunity  to  live 


FREE  BANKING.  87 

is  denied  to  man,  save  by  special  privilege  from 
a  few  individuals,  men  can  be  compelled  to 
labor  their  weary  lives  through  for  sufficient 
rice  and  bread  for  maintaining  a  miserable  ex- 
istence; but  not  so,  yet,  in  the  United  States, 
nor  even  in  Mexico.  Nor  would  wages  in 
Mexico  be  so  low  as  they  are  if  man's  necessi- 
ties there  were  greater.  If  there  were  less 
sun  and  fewer  bananas,  and  more  frost  and 
grass  in  Mexico,  wages  there  would  be  higher 
per  capita.  Measured  by  the  work  per- 
formed, there  are  but  few  places  in  the  world 
where  labor  is  so  well  rewarded  as  in  Mexico. 

The  exact  meaning  of  the  language  used  in 
the  plank  of  the  Chicago  platform  of  1896 
that  relates  to  the  currency  bills  was  not  very 
clear,  excepting  so  far  as  it  related  to  the 
national  bank  system.  There  was  no  mistak- 
ing that  the  Democratic  party,  of  which  the 
Chicago  convention  was  the  oracle,  demanded 
that  "  the  right  to  issue  paper  money  should 
not  be  delegated  by  the  Government  of  the 
United  States  to  corporations  or  to  individu- 
als." It  did  not  demand  that  paper  money 
should  be  issued  by  the  Government,  nor  did 
it  advocate  nor  oppose  the  giving  to  corpora- 
tions or  to  individuals  the  right  to  issue  bills 
that  might  be  used  for  currency. 

But  it  did  most  emphatically  protest  against 
the  Government  conferring  legal-tender  privi- 


88  FREE  BANKING. 

leges  upon  any  currency  not  issued  by  the 
Government. 

It  is  a  fair  inference,  however,  that  the 
Chicago  platform  of  1896  advocated  the  issu- 
ing, by  the  Government,  of  paper  money 
armed  with  legal-tender  powers  and  redeem- 
able in  coin,  either  of  gold  or  silver,  at  the 
option  of  the  Government. 

Few  men  will  dispute  the  correctness  of  the 
theory  that  the  Government  should  not  con- 
fer legal-tender  powers  upon  currency  issued 
otherwise  than  by  the  Government  itself.  The 
only  essential  difference  between  the  R^epubli- 
can  and  the  Chicago  platform,  so  far  as  they 
relate  to  the  currency  question,  is  that  the 
Republicans  demanded  that  all  paper  money 
issued  by  the  Government  shall  be  redeemable 
in  gold,  while  the  Chicago  platform  demanded 
that  such  notes  must  be  redeemed  in  coin. 

It  is  evident  that  the  majority  of  the  Ameri- 
can voters  believed  that,  when  the  Govern- 
ment opened  its  mints  to  the  free  coinage  of 
silver,  silver  would  displace  gold  as  the  basis 
of  the  American  paper  dollar,  and  that  the  dol- 
lar bill  would  be  redeemable  in  a  coin  the  gold 
value  of  which  would  be  considerably  less  than 
that  of  a  gold  dollar.  And  they  also  believed 
that  such  was  the  true  meaning  of  the  cur- 
rency plank  of  the  Chicago  platform. 

It  is  equally  evident,  on  the  other  hand, 


FREE  BANKING.  89 

that  the  majority  of  voters  believed  that  the 
election  of  Mr.  McKinley  insured  the  re- 
demption in  gold  of  every  bill  issued  or 
guaranteed  by  the  Government. 

The  Republican  party  is  pledged  to  continue 
the  Government  in  the  banking  business. 
Whether  by  bond-selling  or  increased  taxa- 
tion, it  is  pledged  to  maintain  a  sufficient 
amount  of  gold  in  the  Treasury  to  maintain 
the  public  confidence.  This  is  embodied  in 
the  declaration  that,  "  All  our  silver  and  paper 
money  must  be  maintained  at  parity  with 
gold."  It  practically  stamps  silver  as  a  base 
metal,  and  the  silver  dollar  as  a  fiat  dollar. 

Would  it  not  have  been  greater  wisdom 
had  the  Republican  party  declared  that  silver 
was  too  valuable  a  metal  to  be  used  as  tokens 
for  money?  that  paper  was  less  expensive  and 
more  convenient  for  that  purpose?  that  good 
business  principles  demand  that  the  silver  dol- 
lar, together  with  the  silver  bullion  not  neces- 
sary for  subsidiary  currency  now  in  the 
Treasury  of  the  United  States,  should  be  sold 
in  the  best  attainable  markets?  and  paper 
money,  to  the  value  realized  from  such  sales 
of  silver,  should  be  issued  instead?  or,  at  least, 
such  amount  of  it  as  the  business  of  the  coun- 
try demanded?  This  would  have  been  a  more 
logical  declaration  to  make. 

If  the   silver  dollar   is  a   fiat  dollar,   and. 


90  FREE  BANKING. 

surely,  under  the  present  monetary  system  of 
the  United  States,  no  one  will  seriously  claim 
that  it  is  not,  why  should  the  Government  pay 
fifty  cents'  worth  of  gold  for  a  piece  of  silver 
upon  which  to  stamp  "  one  dollar,"  when  for 
that  amount  of  gold  enough  paper  may  be 
bought  to  make,  perhaps,  five  hundred  one- 
dollar  notes.  Certainly  no  one  who  uses 
money  in  the  United  States  will  give  more 
commodities  or  more  labor  for  a  silver  dollar 
than  he  would  give  for  a  paper  dollar.  Out- 
side of  the  United  States,  among  civilized 
people,  the  paper  dollar  will  command  the 
greater  price,  because  it  will  cost  less  to  get  it 
back  to  its  highest  market. 

The  National  Democracy,  that  assembled 
in  convention  at  Indianapolis,  declared,  with 
an  emphasis  that  cannot  be  misunder- 
stood, against  a  continuance  of  the  '*  pres- 
ent patchwork  system "  of  national  paper 
currency,  and  maintained  the  necessity  of 
such  intelligent  currency  reforms  as  will 
confine  the  Government  to  its  legitimate 
functions,  completely  separate  it  from  bank- 
ing business,  *'  and  afford  to  all  sections 
of  our  country  a  uniform,  safe,  and  elastic  cur- 
rency under  governmental  supervision,  meas- 
ured in  volume  by  the  needs  of  the  country." 

That  this  plank  of  the  Indianapolis  plat- 
form clearly  stated  the  necessities  of  currency 


FREE  BANKING.  91 

reform,  cannot  be  disputed.  That  it  acknowl- 
edged the  urgent  necessity  of  an  elastic  cur- 
rency is  apparent  also.  But,  unfortunately, 
the  way  to  accomplish  this  necessary  reform, 
and  thus  secure  the  elastic  currency  acknowl- 
edged to  be  a  necessity,  is  but  opaquely  inti- 
mated. The  Government  supervisors  capable 
of  measuring  the  needs  for  currency  of  the 
various  parts  of  the  United  States  and  the  ex- 
tent of  the  volume  best  suited  to  such  needs, 
as  well  as  the  methods  of  getting  the  currency 
to  them,  are  angels  that  have  not  yet  been 
sent  to  earth.  And  if  the  people  are  com- 
pelled to  await  their  coming  before  such 
monetary  reform  can  be  instituted,  it  is  use- 
less to  waste  further  time  and  thought  on  the 
subject. 

The  Government  should  retire  from  bank- 
ing business  entirely.  So  long  as  it  issues 
paper  money,  or  controls  its  issue,  or  guaran- 
tees the  face  value  of  bills  or  of  anything  else 
issued  as  a  substitute  for  money,  it  remains  in 
the  banking  business.  To  explain  how  the 
Government  can  separate  itself  entirely  from 
the  banking  business,  yet  supervise  the  bank- 
ing business  at  one  and  the  same  time,  must 
be  left  to  those  gentlemen  wdio  are  responsible 
for  that  Indianapolis  currency  plank.  The 
Government's  business  with  the  money  of  the 
country  is  to  stamp  a  measure  of  value  on 


92  FREE  BANKING. 

"  coin  money."  There  its  obligation  to  the 
people  ends.  To  do  more  than  that  for  many 
years  of  the  country's  history  has  generally 
been  believed  to  be  an  usurpation  of  power 
not  delegated  to  it  by  the  States.  The  Gov- 
ernment should  demand  from  its  citizens  that 
taxes  should  be  paid  with  the  standard.  And 
it,  too,  should  pay  its  debts  with  the  standard 
coins  and  thus  let  the  citizens  be  free,  each 
State,  each  community  ascertaining  the  means 
of  expediting  its  business,  and  in  such  a  man- 
ner as  it  is  believed  is  best  suited  to  promote 
its  greatest  interests. 

The  impetus  that  the  possessors  of  good 
character,  correct  business  methods,  and 
wealth  may  give  to  industrial  develop- 
ments of  communities  has  emphatically  been 
shown  in  an  illustrious  example — the  Bank  of 
Venice.  For  upward  of  six  hundred  years 
that  bank,  notwithstanding  revolutions,  the 
wreck  of  empires,  and  the  unceasing  geo- 
graphical changes,  practically  sustained  the 
enormous  commerce  of  the  Adriatic  and  the 
Black  seas,  and  their  thousands  of  miles  of 
tributary  rivers — a  most  gigantic  force  in  the 
intellectual  development  of  Europe;  a  force, 
too,  that  destroyed  the  charnel  house  of 
free  thought  that  Roman  jurisprudence  and 
religion  had  for  so  many  centuries  maintained. 
It  was  this  commerce,  promoted  by  the  Bank 


FREE  BANKING.  93 

of  Venice,  that  made  a  Galileo  and  a  Colum- 
bus possibilities  in  Rome.  A  Church  that  had 
accepted  the  belief  that  the  earth  was  a  flat 
disk,  surrounded  by  impassable  walls  and  held 
in  position  by  four  enormous  elephants, — 
without  troubling  itself  to  explain  what  power 
sustained  the  elephants, — and  a  judiciary  that 
sanctioned  the  Church's  prosecution  of  Hypa- 
tia  because  she  taught  that  such  a  proposition 
was  absurd,  was  not  likely  to  develop  scien- 
tists and  navigators.  It  was  intercourse  with 
people  who  had  read  the  stars  and  studied 
natural  developments  of  animal  and  plant  life, 
and  wanted  to  know  some  reason  for  the  cause 
that  produced  the  effects  other  than  that  it 
was  the  will  of  an  unknown  personality. 
The  fact  that  the  vicar,  in  Rome,  of  that  un- 
known personality  was  often  a  very  bad  man, 
made  progressive  Romans  susceptible  stu- 
tlents  of  the  Alexandrian  schools.  Com- 
merce on  those  seas  and  on  their  tributary 
rivers  was,  to  the  Middle  Ages,  what  the 
trackless  waters  of  the  ocean  are  to  commerce 
of  the  world  to-day. 

The  Bank  of  Venice  did  not  deal  in  money; 
did  not  receive  it  on  deposit;  did  not  pay  it  out 
on  drafts;  it  was  simply  a  clearing  house  of 
commodities  and  credits.  Of  course  the 
measure  of  values  by  which  exchange  of  com- 
modities was  expedited  was  gold  and  silver. 


94  FREE  BANKING. 

Men  well  known  to  the  management  of  the 
Bank  for  their  business  ability,  integrity,  and 
worth,  lent  to  the  bank  their  indorsement  to 
a  limited  amount,  and  on  the  basis  of  such 
loans  the  Bank  issued  trading  certificates  or 
letters  of  credit,  so  much  more  valuable  to  the 
commercial  venturers  of  that  period  of  politi- 
cal disturbance  than  was  either  gold  or  silver, 
that  users  of  these  certificates  were  frequently 
willing  to  pay  a  premium  above  the  value  of 
gold  for  the  privilege;  and,  at  times,  upward 
of  thirty  per  cent,  was  paid  as  premiums.  The 
system  of  the  Bank  of  Venice  was  simply  that 
of  bookkeeping.  The  Bank  continued  to  do 
business — a  mighty  factor  in  promoting  com- 
mercial and  industrial  developments  in 
Venice — until  that  ruthless  destroyer  of  indus- 
trial development,  the  great  Napoleon,  over- 
threw it  by  war  and  devastation. 

The  history  of  the  building  of  a  market 
house  on  the  little  island  of  Guernsey  is  a 
good  illustration  of  what  can  be  done  without 
money  of  gold  or  silver — or  any  form  of 
money  the  soundness  of  which  was  guaranteed 
by  a  great  government.  One  of  the  towns  of 
that  island  felt  the  need  of  a  market  house, 
but  it  could  not  raise  the  money  necessary  to 
build  it.  It  was  ascertained  that  there  was  an 
abundance  of  material,  enough  skilled  and  un- 
skilled artisans  accessible  that  money  could 


FREE  BANKINCr--^y,  ..nXi^iff^^^S 

readily  command.  The  governor  of  the 
island,  Daniel  DeLisle  Brock,  determined 
that  the  market  house  should  be  built;  that  the 
skill  and  material  were  accessible;  money  was 
not  a  necessity.  He  issued  five  thousand  one- 
pound  notes.  To  inspire  confidence  in  own- 
ers of  the  material  needed  for  the  building, 
and  in  the  artisans  necessary  for  its  erection, 
he  made  those  notes  legal  tenders  on  the 
island  of  Guernsey.  But  making  them  legal 
tenders  did  not  inspire  as  much  confidence  in 
the  value  of  those  notes  as  was  inspired  by 
the  character  of  the  people  who  issued  them. 
Every  man  who  received  those  notes  believed 
that  they  would  be  redeemed  in  the  best  and 
most  precious  money  of  England,  or  its 
equivalent  in  other  commodities. 

Legal- tender  notes  are  by  no  means  always 
accepted  at  their  face  value  in  standard 
money,  save  by  those  who  are  compelled  by 
law  so  to  accept.  And  by  the  nation  that 
issues  them  they  are  maintained  at  par  with 
the  standard  only  at  great  cost.  Competent 
financiers  maintain,  with  great  force,  that  it 
has  cost  the  United  States  upward  of  two 
billions  of  dollars  to  maintain  the  greenback 
currency  at  par  with  gold. 

The  community  of  St.  Peters  accepted  these 
notes  issued  by  Governor  Brock,  it  being 
clearly  understood  that  the  notes  were  only  to 


96  FREE  BANKING. 

be  issued  to  pay  for  the  construction  of  the 
market  house;  the  notes  were  to  be  returned 
to  the  governor  for  rentals  of  that  house,  and 
when  returned  were  not  to  be  reissued  save 
for  repairs  or  work  upon  the  market  house. 
And  as  these  notes  from  time  to  time  accumu- 
lated, beyond  the  amount  necessary  for  con- 
struction and  repairs  to  the  house,  they  were 
destroyed  by  the  governor.  In  the  course  of 
a  very  few  years  all  these  notes  were  collected 
by  Governor  Brock;  and  by  him,  in  the  pres- 
ence of  the  assembled  people  of  the  town,  they 
were  canceled  by  flame.  There  in  a  remote 
island  of  England,  by  a  people  in  affinity  more 
French  than  English,  a  most  excellent  market 
house  was  built,  which  for  many  years  served 
as  a  useful  building  and  a  source  of  income  to 
the  people  of  St.  Peters;  and  without  a  coin 
of  the  Government  or  a  note  of  governmental 
creation.  What  was  done  in  the  town  of  St. 
Peters  on  the  Isle  of  Guernsey  may  be  done 
anywhere  else  on  earth,  when  the  material  and 
the  labor  are  accessible,  without  the  aid  of 
anything  that  the  majority  of  sound-money 
economists  term  money. 

To  say  it  is  possible  that  Governor  Brock's 
system  may  be  useful  in  small  communities, 
but  not  in  great  nations,  is  to  advance  a 
convincing  argument  against  extending  to 
the     central     government     the     control    of 


FREE  BANKING.  97 

monetary  systems.  If  a  great  government 
cannot  insure  as  much  happiness  and  as  com- 
fortable an  existence  to  its  people  as  a  gov- 
ernment of  a  small  community  can,  there  is 
then  no  questioning  of  the  fact  that  a  great 
government  is  to  its  people  an  affliction  rather 
than  a  blessing,  and  that  any  effort  by  anyone 
to  extend  the  boundaries  of  a  nation  is  in  the 
direction  of  a  further  oppression  of  the  people 
of  that  nation. 

Some  such  thought  undoubtedly  pervaded 
the  minds  of  our  Revolutionary  fathers.  The 
fear  of  centralizing  the  powers  of  the  Govern- 
ment seems  to  have  possessed  the  minds  of  all 
who  had  fought  for  liberty  during  the  period 
between  the  acknowledgment  of  American 
Independence  and  the  adoption  of  the  Federal 
Constitution.  And,  apparently,  it  was  a  great 
relief  tO'  all  when  plans  of  the  Government 
were  adopted  that  gave  to  the  Central  Govern- 
ment the  dignity  of  a  great  nation,  with  powers 
to  maintain  that  dignity  before  the  world, 
yet,  at  the  same  time,  giving  to  each  State  of 
the  Union  the  privilege  of  self-government. 
United  for  protection  against  external  aggres- 
sion, they  divided  for  internal  progress. 
Hence  a  community  of  free  States,  throughout 
which  freedom  to  trade  was  the  equal  right 
of  all  its  citizens,  and  where  personal  privi- 
leges and  individual  freedom  were  granted  to 


9^  FREE  BANKING. 

or  taken  from  them  by  the  authority  of  the 
State  only;  that  is,  only  to  the  very  limited 
extent  to  which  the  authority  of  the  United 
States  had  been  restricted  by  the  States  upon 
the  adoption  of  the  Federal  Constitution. 

In  the  United  States  the  man  who  robs  can- 
not be  punished  by  the  laws  of  the  United 
States,  save  in  the  few  cases  where  the  power 
to  punish  criminals  has  been  conceded  by  the 
States  to  the  general  Government.  Man  is 
practically  protected  in  his  property  and  per- 
sonal rights  by  the  laws  of  the  States,  and  the 
national  Government,  without  usurpation  of 
authority,  cannot  punish.  The  Federal  Gov- 
ernment can  punish  for  illicit  distilling  of 
spirits,  for  smuggling,  for  counterfeiting 
National  Government,  without  usurpation  of 
such  acts  as  are  unlavv^ful  under  Federal 
statutes,  provided  those  Federal  statutes  do 
not  usurp  the  privilege  or  right  of  the  States. 
But  there  the  Federal  powers  to  punish 
crimes  in  the  United  States  end. 

Has  this  feature  of  the  Federal  Government 
been  its  weakness  or  its  strength  during  the 
past  eleven  decades  of  its  existence? 

Is  there  a  student  of  politics  and  of  history 
in  all  the  wdde  world,  who  has  a  reputation 
worth  considering,  who  will  have  the  hardi- 
hood to  wTite  above  his  signature  the 
declaration  that  he  believes  the  United  States 


FREE  BANKING.  99 

would  have  been  more  progressive  and  have 
grown  to  greater  eminence  in  arts,  science, 
justice,  and  power,  had  a  monarchy — no  mat- 
ter what  kind,  from  the  autocracy  of  Russia 
to  the  freedom  of  England — been  erected  here 
in  1788  instead  of  a  Republic  of  republics? 

There  is  no  reason  to  doubt  that  men  can 
be  made  happier  by  self-government  than  by 
dictatorial  government.  There  is  no  doubt 
but  that  climatic  conditions  afTect  man's  natu- 
ral tastes  and  sensibilities;  there  is  no  doubt 
that  a  system  of  government  may  be  perfectly 
acceptable  to  New  York  and  much  esteemed 
there,  and  believed  to  be  nearly  or  quite  a  per- 
fect system,  which  in  other  parts  of  the  coun- 
try would  be  perfectly  worthless,  while  in  still 
other  parts  it  would  be  even  harmful. 

These  are  plain  common-sense  propositions 
that  demand  the  thoughtful  attention  of  the 
American  people;  and  until  they  are  given 
serious  attention  there  can  be  no  greatly  bene- 
ficial reforms  in  the  monetary  system  of  the 
country.  Bimetallism  would  practically  aid 
monetary  reform,  if  it  could  be  successfully 
accomplished.  But  it  could  be  successfully 
accomplished  only  by  the  united  effort  of 
the  commercial  nations  of  the  world.  Gov- 
ernment issue  of  all  the  paper  money  per- 
mitted to  be  used  in  the  country  would  not  be 
a  reform;  it  would  be  a  decided  retrogression. 


lOO  FREE  BANKING. 

No  kind  of  paper  money  can  be  made  a  legal 
tender  for  debts  and  be  of  advantage  to  the 
people  of  the  country  that  issues  it.  It  will, 
however,  prove  to  be  of  immense  advantage 
to  some  people  of  those  countries  who  deal  in 
money.  Fiat  money  is  fruitful  money  to  the 
money-dealers  and  money-changers. 


CHAPTER  VI. 

It  is  a  serious  study  to  determine  what  kind 
of  currency  a  sound  financial  policy  demands 
for  business  purposes;  to  make  such  currency 
the  best  attainable  mpney  possible,  or,  in  other 
words,  to  make  it  not  only  sound  currency 
but  one  also  readily  available  for  currency  pur- 
poses in  all  communities  equitably  entitled  to 
it.  That  there  has  never  been  a  very  clear 
definition  of  what  the  term  *'  sound  currency  " 
is  intended  to  imply,  is  much  to  be  regretted. 
If  it  is  to  be  read  as  meaning  a  currency  to  be 
used  only  for  the  payment  of  interest  and 
taxes,  the  soundest  currency,  then,  would  un- 
doubtedly be  the  currency  that  could  be  most 
readily  disposed  of  in  exchange  for  com- 
modities in  any  of  the  markets  of  the  world. 
It  is,  therefore,  unnecessary  to  say  that  such  a 
currency  should  be  made  of  gold. 

Inasmuch  as  the  commercial  industry  and 
enterprise  of  the  British  kingdom  have  best 
acquainted  the  commercial  world  with  the 
gold  sovereign  of  England,  that  coin  would 
perhaps  suit  best  for  an  international  or  an  all- 
round  trading  currency.  But  to  use  the  British 
gold  currency  in  the  United  States  would  be  a 


102  FREE  BANKING. 

source  of  much  inconvenience,  and,  if  used 
here,  doubtless  would  in  many  cases  be  to  the 
disadvantage  of  many  ill-informed  people. 

If  this  proposition  be  correct,  it  follows, 
then,  that  no  gold  coin  or  any  coin  whatever 
can  be  the  best  currency,  even  if  it  be  sound 
currency  like  the  British  sovereign  or  the 
American  gold  dollar.  All  there  is  of  value 
in  coin-money,  not  possessed  by  any  other 
kind  of  money,  is  the  bullion  value  of  such 
coin  as  a  measure. 

To'  enter  into  an  argument  to  prove  this 
proposition  is  unnecessary.  The  commerce  of 
the  world  proves  it.  The  ratio  of  coin-pay- 
ment to  the  total  payment  of  commercial  and 
State  obligations  is  so  infinitesimally  small  it 
is  scarcely  to  be  represented  in  figures.  So 
long  as  the  great  trading  nations  of  the  world 
use  gold  bullion  as  a  measure  to  efifect  ex- 
changes and  settle  balances,  there  can  be  no 
currency  sounder  than  a  currency  of  gold 
coins  of  fixed  and  reliable  weight  and  fineness. 
Such  coins  are  rarely  used  for  currency;  they 
are  used  rather  as  a  measure  of  value. 

Even  in  France,  where  small  silver  coins  are 
so  generally  used  by  the  people,  paper  cur- 
rency circulates  to  many  times  the  value  of 
the  coin  in  use.  Paper  is  used  there  almost 
exclusively  for  currency,  except  where  frac- 
tional currency  is  necessary;  even   the   sub- 


FREE  BANKING.  103 

sidiary  silver  coins  are  banked  away  by  the 
thrifty  French  peasantry  for  safe-keeping.  It 
is  true  that  France  in  her  financial  system 
makes  use  of  nearly  or  quite  $1,200,000,000 
worth  of  gold  and  silver  coin.  But  $750,000,- 
000  worth  of  paper  money  furnishes  the  work- 
ing medium  of  exchange  for  her  tradesmen; 
and  at  least  three-quarters  of  her  coin  is  held 
in  reserve  for  what  is  believed  to  be  necessary 
for  the  maintenance  of  a  sound  business  and 
financial  system.  It  is  not  used  to  perform 
the  functions  of  money  any  more  than  gold 
and  silver  bars,  the  weight  and  fineness  of 
which  are  vouched  for  by  the  Government, 
would  perform  such  functions. 

The  United  States  held  in  its  vaults,  Janu- 
ary I,  1895,  nearly  $650,000,000  in  gold  and 
silver  coins  and  bullion ;  and  nearly  $500,000,- 
000  more  was  held  by  banking  institutions  and 
individuals  in  safe-deposit  vaults.  The  value 
of  coins  circulating  as  currency  among  the 
people  certainly  would  not  be  any  larger  than 
that  represented  by  the  silver  dollars  and  sub- 
sidiary coins — nearly  all  silver — reported  by 
the  Treasury  Department  to  have  been  taken 
out  of  the  Mint,  the  coin  value  of  which  was 
stated  to  have  been  $120,561,176.  The 
paper  money  in  circulation  at  the  same  time 
was  also  reported  to  have  been  upward  of 
$1,000,000,000. 


104  FREE  BANKING. 

There  can  be  no  disputing  the  fact  that  all 
of  the  United  States  silver  money  is  worth,  as 
money,  nearly  or  quite  double  the  amount  it  is 
worth  as  bullion.  Fifty  per  cent,  of  its  money 
value  is  simply  the  result  of  a  fiat  of  the  Gov- 
ernment; and  therefore  it  should  be  properly 
classed  with  paper  money — of  a  better  grade, 
perhaps.  Both  silver  and  paper  money  are 
freely  accepted  by  the  people  of  the  United 
States  as  money,  owing  to  the  faith  of  the  peo- 
ple in  the  intention  and  ability  of  the  maker  of 
such  money  to  keep  its  face  value  in  parity 
with  the  soundest  money  of  the  world — gold. 
The  assurance  of  its  weight  and  fineness  is 
stamped  upon  it  by  a  Government  command- 
ing the  confidence  of  the  commercial  world; 
and,  so  stamped,  without  any  regard  to  a  ratio 
between  gold  and  silver  bullion,  it  is  just  such 
stamping  as  England  puts  upon  her  gold 
money.  That  the  legal-tender  quality  of  this 
money  would  force  the  people  to  take  it  un- 
willingly, is  true. 

Great  Britain,  to  keep  her  gold  coin  in  the 
country,  does  not  permit  an  issuance,  in  Eng- 
land proper,  of  paper  bills  of  less  value  than 
one-pound  denomination.  The  Bank  of 
England  issues  none  for  less  than  five 
pounds.  Consequently,  in  England's  home 
business,  a  far  greater  proportion  of  coined 
money    to    paper    is    issued    than    elsewhere 


FREE  BANKING.  105 

among  the  great  commercial  nations  of  the 
world.  This,  however,  does  not  prove  that  the 
masses  in  England  are  made  richer  thereby. 
The  compactness  of  the  English  people  doubt- 
less enables  their  business  to  be  conducted 
with  less  currency  than  other  nations  of  Hke 
business  volume,  whose  people  are  scattered 
over  a  many-times  greater  area.  England  re- 
quires but  $600,000,000  worth  of  coin  and 
bills  to  transact  all  her  enormous  business, 
while  France  needs  three  times  that  amount. 
Germany  uses  nearly  $1,500,000,000  worth  of 
currency  in  various  forms,  and  the  United 
States  has  more  than  $2,000,000,000,  and,  from 
intelHgent  sources  from  all  parts  of  the  coun- 
try, the  demand  upcm  the  Government  is  made 
for  more. 

This  demand  for  more  currency  invites  the 
most  serious  attention  of  every  American  citi- 
zen. This  request  does  not  come  from  silver- 
producing  States  alone,  nor  can  it  be  lightly 
pushed  aside  as  we  would  push  the  demands  of 
thoughtless  children,  consoling  ourselves  with 
the  belief  that  we  are  wiser  than  they,  and 
know  better  their  needs.  When  such  States 
as  Kansas  request,  in  unlimited  quantities, 
free  coinage  of  silver,  we  cannot,  as  wise  men, 
deny  that  request  on  the  assumption  that  her 
population  is  too  ignorant  to  be  permitted  to 
influence   financial   legislation.      Kansas   was 


io6  FREE  BANKING. 

settled  by  the  best  blood  of  New  England. 
Her  schoolhouses  and  churches  were  built 
while  yet  the  floor-beams  of  her  homesteads 
were  being  laid.  A  newspaper  was  an  estab- 
lished fact  before  the  teacher  and  the  preacher 
had  been  assigned  to  duty  there.  Such  was 
the  method  of  settling  Kansas,  and  in  her 
moral  and  intellectual  development  she  has 
taken  no  steps  backward. 

In  the  demand  made  by  Kansas  and  other 
States  where  there  can  be  no  such  influence  as 
silver  mines  and  silver-mine  boomers  to  influ- 
ence the  votes  of  the  people,  it  is  plainly  to  be 
seen  that  there  is  in  the  currency  system  an 
inequality,  an  injustice,  and  a  disturbing  in- 
fluence great  enough  to  fill  the  minds  of  the 
leading  men  of  highly  intelligent  communi- 
ties with  a  desire  for  some  radical  change  in 
the  money  system.  The  gold  coins,  they 
know  by  experience,  cannot  keep  in  circula- 
tion, and  by  sad  experience  they  also  know 
that  the  paper  money,  circulating  upon  the 
faith  in  the  Government  and  upon  a  gold  basis, 
is  also,  on  the  least  disturbance  in  the  money 
market,  taken  from  them  to  the  great  money 
centers.  When  needed  most,  it  is  to  be  had 
only  by  the  weaker  communities  making 
business-destroying  sacrifices  of  their  com- 
modities. 

It  is  the  hope,  possibly,  that  a  money  made 


FREE  BANKING.  107 

of  or  based  upon  silver,  which  would  not  be  so 
easily  attracted  from  them,  that  impelled  them 
so  urgently  to  demand  unlimited  silver  and 
free  coinage.  That  silver  money  would  act 
dififerently  with  them  than  gold  acts  now  is 
not  probable.  It  is  not  gold  or  silver  that  they 
so  much  demand;  it  is  some  form  of  currency 
that  will  expedite  business  transactions.  They 
know  the  present  system  is  dangerously  faulty ; 
they  believe,  in  fact,  it  could  not  be  worse; 
that  any  change  would  be  an  improvement. 
Upon  free  coinage  of  silver  they  compromised, 
because  it  was  to  them  apparently  a  possibility, 
and  was  a  radical  measure.  Few  people,  how- 
ever studious,  who  have  not  had  intimate  rela- 
tions with  the  country  districts  of  the  United 
States,  can  begin  to  realize  how  great  is  the 
volume  of  business  done  in  many  country  dis- 
tricts of  the  United  States  simply  by  barter. 

This  demand  for  money,  made  by  so  many 
of  the  States,  is  not  altogether  the  demand  of 
ignorance.  Governmental  policies  have  al- 
ways been  more  or  less  speculative,  and  that 
there  is  much  of  the  speculative  in  the  theory 
of  free  coinage  of  silver  is  indeed  true.  The 
business  men  of  the  South  and  West  want  a 
more  convenient  medium  of  exchange  than 
they  now  have.  The  national  banking  sys- 
tem has  failed  to  provide  currency,  with 
equity    and    justice,    to    the    entire    people. 


io8  FREE  BANKING. 

Rather,  indeed,  has  that  system  enabled 
the  banking  institutions  of  the  great  com- 
mercial centers  to  control  at  times  the 
volume  of  circulation  of  currency  notes.  In 
most  cases,  it  is  true,  they  have  done  this  for 
their  own  protection,  or  rather  for  the  protec- 
tion of  the  industries  that  their  particular 
banking  system  largely  sustained.  On  such 
occasions  they  have  oppressed  the  commercial 
industries  of  other  centers — in  many  cases  to 
the  extent  even  of  destroying  them. 

The  people  of  the  South  and  West  have 
for  years  in  their  business  relations  been  sub- 
jected to  conditions  that  have  made  it  exceed- 
ingly difftcult  for  them  to  transact  business. 
Those  having  the  strongest — financially  con- 
sidered— Eastern  connection  possessed  ad- 
vantages. The  weaker  sections,  however, 
could  not  transact  their  usual  business  with 
that  freedom  from  friction  that  in  the  more 
favored  parts  of  the  country  was  usual,  owing 
to  the  scarcity  of  currency  notes.  Small 
checks,  common  in  the  West,  particularly  with 
tradesmen,  were  used  frequently  as  currency, 
which  after  many  months  came  back  to  the 
bank  on  which  they  were  drawn,  soiled  and 
covered  with  indorsements.  No  other  proof 
is  needed  to  show  that  more  currency  was  re- 
quired in  such  communities,  and  that  a  cur- 
rency as  sound  as  the  gold  dollar  was  not  the 


FREE  BANKING.  109 

best  currency  for  expediting  the  business  of 
such  communities.  It  is  absurd  to  say  that, 
if  the  people  of  the  West  have  commodities 
worth  the  amount  of  currency  they  desire, 
they  can  demand  the  currency  bills.  Such  is 
not  the  fact.  In  every  case  where  his  checks 
were  used  for  currency,  not  only  did  the  maker 
possess  the  commodities  to  the  full  extent  of 
the  face  value  of  that  check,  but  he  had  also 
put  those  commodities  into  the  most  conven- 
ient form  for  exchange  into  currency  bills. 
By  the  usual  process,  he  had  established  a 
credit  at  his  bank  by  exchanging  his  com- 
modities for  that  bank's  indorsement  or  credit. 
But  experience  had  taught  him  that  such 
credit  would  permit  him  to  use,  in  a  more  or 
less  cumbersome  way,  the  bank's  credit  and 
his  own  in  the  character  of  a  check  to  liqui- 
date his  own  indebtedness  to  the  extent  of  the 
credit  established,  but  would  not  give  him 
circulating  bills. 

This  proposition  should  be  clearly  under- 
stood. He  established  a  credit  at  that  bank 
by  making  a  deposit  that  was  accepted 
by  the  management  of  the  bank  as  equal 
in  value  to  gold  dollars — to  the  extent 
represented  on  the  book  of  the  bank's 
deposits.  If  the  currency  system  in  use  in  our 
country  had  been  the  best,  the  man  who  de- 
posited his  funds  in  the  national  bank,  "  Bar- 


no  FREE  BANKING. 

ren  Lands,"  Idaho,  should  have  no  more  diffi- 
culty to  draw  out  his  money  in  greenbacks  or 
national-bank  bills,  or  even  gold,  than  has  the 
merchant  who  banks  in  the  Chemical  Bank  of 
New  York.  So  long  as  such  bills  may  more 
readily  be  secured  from  the  banks  of  New 
York  than  from  the  banks  of  St.  Paul,  then 
New  York  has  an  advantage  over  St.  Paul 
sufficient  to  justify  the  people  of  St.  Paul  in 
demanding  of  the  Government  a  different 
condition.  This  is  true  so  long  as  the  Gov- 
ernment assumes  parental  control  over  the 
banking  interests  of  the  country. 

To  dwell  a  little  while  on  the  present  sys- 
tem of  barter  prevailing  in  the  South  and 
West  may  not  be  a  waste  of  time.  The  coun- 
try merchants  in  the  Southern  and  Western 
States  are  practically  the  people's  bankers. 
But  the  people  in  those  sections  of  the  country 
make  deposits  with  their  bankers,  not  in 
money,  but  in  commodities,  and  receive  pay- 
ment, not  in  money,  but  in  commodities.  The 
condition  of  such  a  banking  system  is  that  the 
merchant  will  receive  one  kind  of  commodity 
on  deposit,  and  will  pay  out  in  the  same  or  in 
another  kind  of  commodity,  but  make  pay- 
ments in  commodities  only.  In  many  com- 
munities throughout  the  South  and  West 
money  is  almost  an  unknown  article.  No  one 
of   sense   will   claim   that    such   a    condition 


FREE  BANKING.  m 

represents  a  healthy  business  in  those  com- 
munities. 

The  farmer  takes  his  eggs,  butter,  corn, 
wheat,  poultry,  etc.,  to  the  merchant.  In 
almost  all  sections  of  the  country,  eggs  are 
readily  accepted,  and  at  all  times,  by  the  mer- 
chant, at  prices  fixed  from  day  to  day  by  him ; 
but  with  nearly  all  other  commodities  the  pur- 
chaser of  them  must  consult  the  merchant  be- 
fore bringing  them  to  him  for  deposit  or  sale, 
as  it  may  not  be  convenient  for  him  to  take 
the  commodities  at  that  particular  time. 
This,  of  itself,  is  a  great  inconvenience  to  the 
producer.  Nor  can  the  merchant,  in  safety  to 
his  own  interest,  do  otherwise — else  doubtless 
he  would;  for  it  is  to  the  interest  of  the  mer- 
chant to  be  popular;  and  self-interest  would 
prompt  him  to  accept  all  commodities  offered 
by  the  producer  at  an  agreed  price,  and  at  any 
time,  were  not  such  commodities  presented  to 
him  as  would  make  it  unsafe  for  him  to  do 
so.  Eggs  furnish  to  a  very  great  extent  a  sub- 
sidiary currency  to  the  country  people.  This 
the  following  incidents  show: 

On  one  occasion,  in  a  country  store  in 
Maryland,  a  lad  came  and  ordered  a  dozen 
grains  of  quinine,  in  payment  of  which  he 
handed  up  to  the  clerk  two  eggs.  It  seemed 
to  be  no  unusual  transaction  either  to  the 
boy  or  the  druggist.     On  another  occasion,  in 


112  FREE  BANKING. 

the  same  State,  a  New  York  lad,  temporarily 
on  a  visit  to  his  uncle,  a  storekeeper,  was  be- 
hind the  counter  of  that  uncle's  store  when  an 
old  colored  woman  passed  up  to  him  an  ^'g^ 
with  the  request  to  give  her  ''  a  roll  of  pins 
and  de  balance  in  snuflf." 

When  trade-conditions  in  those  country  dis- 
tricts are  so  good  that  the  country  merchants 
are  always  ready  to  buy  any  of  the  farmer's 
products,  the  farmer  frequently  establishes  a 
credit  at  the  merchant's.  His  deposits  of 
commodities  may  exceed  his  withdrawals  of 
commodities,  perhaps,  by  several  hundred 
dollars'  worth,  but  he  -ii  close  the  account 
only  by  withdrawing  commodities  to  the  value 
of  the  balance.  In  such  cases  the  country 
producer  pays  his  own  indebtedness  by  giv- 
ing orders  to  those  whom  he  wishes  to  pay 
and  who  will  receive  such  orders  on  the  mer- 
chants. But  it  is  always  understood  that 
such  orders  or  drafts  are  to  paid  in  com- 
modities. The  merchant  sends  his  eggs, 
poultry,  and  grain  to  the  cities,  to  be  sold  on 
his  account.  In  return  for  his  products, 
checks  are  sent,  which  go  directly  or  indirectly 
to  the  city  merchant  from  whom  he  makes 
his  purchases.  In  many  such  communities  a 
country  merchant  who  sells  $50,000  worth  of 
goods  in  a  year  has  often  not  handled,  in  that 
time,  $5000  worth  of  money.     Indeed,  there 


FREE  BANKING.  113 

are  communities  of  producers  who  have  pro- 
duced $100,000  worth  of  commodities  for  sale, 
of  which  $99,000  has  been  bartered.  It  is  in 
such  communities,  and  where  such  conditions 
exist,  that  free-coinage  advocates  are  most 
numerous,  and  where  converts  to  such  a 
speculative  theory  of  finances  are  easily  made. 
It  is  in  such  communities  that  ''  Coin's  Finan- 
cial School "  found  attentive  pupils. 

If  we  may  hope  to  turn  such  communities 
from  the  worship  of  the  silver  idol,  we  must 
offer  them  a  currency  that  their  commodities 
will  command,  and  that  the  bank  there  will 
be  abundantly  able,  on  all  conditions  of  hon- 
est and  healthy  business,  to  supply  to  their 
depositors;  the  dollar,  in  such  communities, 
being  equal  to  the  best  dollar  of  the  country, 
and  readily  exchangeable  on  demand  for  the 
best  dollar  in  the  world,  namely,  a  gold  dollar 
of  the  United  States.  But  it  need  not  be  of 
such  a  character  that  a  hundred  miles  away  it 
will  be  worth  as  much  as  it  is  in  the  community 
in  which  the  bank  that  issued  it  is  situated. 
For  this  convenience  that  bank  was  created. 
If  it  be  possible  to  create  a  currency  note  that 
will  serve  all  the  purposes  of  a  gold  coin  of 
like  stamped  value,  in  a  community  in  which 
and  for  which  it  was  issued,  serving  all  the 
purposes  in  that  community  that  a  gold  coin 
would,  and  that,  at  the  same  time,  will  be  too 


114  FREE  BANKING. 

unattractive  to  be  diverted  from  the  com- 
munity for  whose  convenience  it  was  issued, 
that,  then,  would  be  the  best  possible  currency 
for  that  community. 

No  banker  or  borrower  of  money  will  at 
this  date  pretend  to  assert  that  the  First 
National  Bank  of  New  York  is  any  more  bene- 
ficial to  the  people  of  that  city  than  is  the  Man- 
hattan Company  Bank,  merely  because  the 
First  National  Bank  is  operated  under  a  na- 
tional charter,  while  the  Manhattan  is  under 
a  State  charter.  And  while  such  an  object- 
lesson  exists,  it  is  obviously  absurd  to  claim 
that  the  only  safe  banking  system  must  neces- 
sarily be  a  national  system.  It  is  indeed  true 
that  national  currency  and  national-bank  notes 
have  given  the  public  a  most  convenient  cur- 
rency with  which  to  travel,  but  not  more  so 
than  that  possessed  by  the  English  people, 
whose  banks  are  all  private  corporations,  and 
where  the  Government  is  not  responsible  for 
the  payment  of  the  notes. 

The  usefulness  of  the  national  bank  has  been 
much  overestimated,  while  its  bad  features 
have  not  been  well  understood.  To  the  na- 
tional banks  a  monopoly  was  given  when  they 
were  first  established — and  intentionally  so. 
Those  national  banks  organized  in  1863  and 
1864,  which,  also,  were  not  dragooned  into 
organizing  under  a  national  charter,  were  so 


FREE  BANKING.  11$ 

organized  in  consequence  of  a  stimulus,  the 
substance  of  which  was  monopoly.  The 
weaker  State-banks  were  dragooned  into 
organizing  themselves  into  national  banks  be- 
cause of  the  necessity  either  to  abandon  busi- 
ness or  to  adopt  the  new  national-bank  system. 
In  New  York,  as  w^ell  as  in  several  other 
States,  the  bonds  held  as  security  by  the  State 
for  redemption  of  circulating  notes  were  quite 
as  valuable  as  the  United  States  bonds. 
When  the  Government,  in  1865,  taxed  the 
State-bank  notes  ten  per  cent,  per  annum,  it 
became  absolutely  necessary  that  those  banks 
that  could  not  withdraw  their  circulating  notes 
without  selling  their  security  bonds  should 
sell  them  at  once.  And  they  did  so.  By 
those  banks  loans  were  called  in,  payments 
demanded,  their  circulating  notes  canceled, 
and  their  security  bonds  redeemed  with  as 
much  alacrity  as  possible,  so  that,  by  organiz- 
ing under  the  national  banking  system,  those 
bonds  might  be  sold  to  secure  money  with 
which  to  buy  the  Government  bonds  necessary 
to  place  those  banks  in  the  condition  to  save 
their  already-organized  banking  business. 
Many  banks  throughout  the  country  were 
rich  enough  to  protect  themselves  against  be- 
ing forced  into  that  national  banking  system. 
They  simply  called  in  their  circulating  notes, 
and  continued  banking  business  under  their 


Il6  FREE  BANKING. 

State  charter.  And  it  is  a  significant  fact  that 
among  the  banks  that  to-day  have  most  com- 
pletely the  public  confidence,  are  those  State 
banks  that  refused  the  Government's  bribe  in 
1863-64,  and  declined  to  be  dragooned  into 
the  national  banking  system  in  1865. 

The  originators  of  the  national  banking 
system  in  1863  had  too  vividly  before  them 
the  verdict  of  the  people  against  a  really  indi- 
vidual national  bank,  and  it  was  therefore 
necessary  that  they  should  formulate  some 
plan  of  banking  other  than  that  which  the 
people,  under  the  leadership  of  Jackson  and 
Benton,  had  buried  beyond  resurrection  more 
than  twenty-five  years  before.  And  the 
national  banking  system  adopted  by  Secretary 
Chase,  Jay  Cooke,  E.  G.  Spaulding,  and  other 
brilliant  financiers  of  that  day,  was  a  system 
that  only  geniuses  of  the  highest  order  could 
have  devised,  even  with  the  experience  of 
Massachusetts  and  New  York  to  aid  them. 
The  Government  was  in  a  "  wilderness  of 
woe."  Its  very  existence  was  threatened. 
The  booming  of  hostile  cannon  could  be  heard 
by  the  Finance  Committee  while  sitting  in  the 
Treasury  Department,  consulting  with  Secre- 
tary Chase. 

And  only  those  forces  that  money  com- 
manded would  silence  those  threatening  guns. 
Money  in  sufficient  quantity  could  not  be  had 


FREE  BANKING.  II7 

from  those  who  possessed  it,  unless  a  rich,  com- 
pensation was  offered  for  its  use.  Rarely  is 
capital  unselfishly  patriotic.  The  organized 
banks  of  the  country  had  much  of  it.  Under 
their  control  were  those  securities,  whatever 
they  may  have  been,  that  were  required — or 
their  value — by  the  Government.  And  it 
then  became  necessary  for  the  Government 
to  use  every  means  to  possess  them,  so  far  as 
possible,  without  actually  resorting  to  forced 
loans  or  robbery.  Possibly  there  were  two 
hundred  million  dollars'  worth  of  State-bank 
notes  in  circulation  among  the  people.  Those 
financiers  devised  a  plan  to  capture  most  of 
the  values  that  those  notes  represented.  No 
matter  at  what  cost  to  the  stockholders  of 
those  banks,  without  regard  to  the  currency 
of  the  weak  banks,  the  thing  had  to  be  done. 
And  it  was  done.  The  genius  of  America 
was  equal  to  the  occasion.  A  great  national- 
bank  trust  was  created.  The  banking  busi- 
ness, or  that  part  of  it  where  currency  for  cir- 
culation among  the  people  was  an  essential 
feature,  was  converted  into  a  monopoly.  The 
monopoly  was  dealt  out  among  those  com- 
munities alone  that  were  rich  enough  in  capi- 
talists to  lend  money  to  the  Government,  in 
consideration  of  the  monopoly  offered.  The 
bonds  of  the  Government  were  exempt  from 
taxation,  and  for  every  hundred  dollars  lent 


Il8  FREE  BANKING. 

by  such  capitalists  for  such  a  purpose,  the 
Government  gave  its  obhgation  for  one  hun- 
dred dollars,  upon  which  it  guaranteed  inter- 
est in  gold,  and  issued  to  those  capitalists 
ninety  dollars  in  paper  money,  and  so  legis- 
lated that  the  people  were  compelled  to  take 
ninety  dollars  from  those  capitalists  for  their 
full  par  value.  By  forcing  the  greater  number 
of  the  existing  banks  to  close  out  their  other 
securities,  the  Government  artificially  lessened 
the  value  of  all  other  kinds  of  securities,  in- 
cluding municipal  and  State  bonds,  and  thus 
by  mere  force  it  appreciated  the  value  of 
United  States  bonds. 

It  was  a  stroke  of  financiering  that  places 
Mr.  Chase  among  the  foremost  financiers  of 
the  world — if  success  in  getting  money  for 
immediate  wants,  without  regard  to  future 
calamities,  be  successful  financiering. 

Hundreds  of  national  banks  were  organized, 
each  with  its  staff  equipment  of  officers.  But 
in  the  control  of  all  was  a  National  Comp- 
troller with  extraordinary  powers  under  the 
law — a  power  purposely  given  to  him — that 
practically  constituted  the  system  a  national- 
bank  trust.  An  annual  tax  of  ten  per  cent,  was 
put  on  all  other  bank  notes.  From  such  a  trust 
the  people  cannot,  now  that  war  necessities 
1  ave  ceased  to  exist,  derive  any  special  bene- 
fit, unless  it  be  because  of  the  superiority  of 


FREE  BANKING.  119 

that  banking  system  over  all  others.  When 
organized,  the  very  monopolistic  character  of 
those  banks  appealed  to  the  selfishness  of 
capital,  and,  as  the  Government  necessities 
required  that  money  should  be  raised  at  once, 
to  accomplish  that  purpose  the  method  pur- 
sued was  possibly  the  best  available  one  by 
which,  to  use  a  bonus. 

The  evils  of  monopolies  need  not  be  dis- 
cussed in  this  book ;  they  are  too  apparent  to 
the  ordinary  student  of  pohtical  economy  to 
waste  time  in  their  consideration. 

If  the  present  national  banking  system  is  as 
perfect  as  its  friends  claim  it  to  be,  it  should 
within  its  own  resources  provide,  and  conse- 
quently control,  or  rather  equitably  issue,  all 
the  currency  notes  used  by  the  people  of  the 
United  States.  The  coinage  of  the  country, 
under  honest  methods,  and  limited, — as  in  for- 
mer years  when  special  legislation  was  not  in- 
voked to  create  artificial  value  of  the  metals 
used  in  such  coins, — would  be  limited  to  the 
extent  of  the  demands  by  the  people  of  the 
United  States  for  those  coins,  and  foreign 
balances  would  be  adjusted  as,  in  fact,  they 
are  now,  by  the  bullion  values  of  the  gold  coin 
of  the  country.  Under  such  conditions  there 
would  be  but  a  very  limited  coinage,  and  bul- 
lion assayed  by  the  Government  might  more 
frequently  than  othen\ase  be  used  in  the  set- 


120  FREE  BANKING. 

tlement  of  those  balances.  But  for  the  Gov- 
ernment's indorsement  of  the  purity  of  the 
metal  used  therein,  the  gold  coinage  of  no 
country  to-day  is  of  any  more  value  to  its  peo- 
ple than  is  an  equal  quantity  of  gold  bullion; 
and  excepting  for  subsidiary  coins,  the  same 
is  especially  true  of  silver. 

Coinage  of  either  gold  or  silver  legal-tender 
money  will  probably  prove  to  be  more  of  a 
menace  than  a  benefit  to  commerce,  until  the 
commercial  nations  agree  upon  a  ratio  of  value 
between  the  two  metals,  and  upon  an  agree- 
ment to  maintain  that  ratio. 

National-bank  currency  could  not  be  flex- 
ible under  any  conditions  other  than  that  of  the 
Government  being  a  creditor  to  large  amounts 
of  the  banks ;  when  Congress  and  the  national 
Treasury  Department  were  incessantly  ex- 
panding and  contracting  the  Government's 
indebtedness  to  those  banks  as  the  require- 
ments of  the  trade  of  the  country  for  bank  bills 
demanded.  The  genius  has  yet  to  be  born 
that  can  successfully  and  satisfactorily  execute 
such  an  office.  Under  the  present  condition 
it  must,  of  necessity,  be  steadily  contracted  as 
those  bonds  guaranteeing  the  national-bank 
notes  fall  due.  Were  the  Government  to  liqui- 
date its  indebtedness  the  national  banks  would 
cease  to  exist, — unless  new  legislation  be  re- 
sorted to.     It  could  not,  under  any  condition 


FREE  BANKING.  121 

of  governmental  poverty  or  wealth,  "be 
thoroughly  elastic.  National  banks  for  de- 
posit purposes,  and  for  such  advantages  as 
result  from  the  use  of  bank  checks,  cannot, 
therefore,  have  any  advantage  over  the  private 
bank  or  private  individual,  so  long  as  the  pri- 
vate bank  or  private  individual  has  the  confi- 
dence of  the  trading  public.  They  certainly 
have  established  no  claim  to  the  credit  of  being 
able  more  equitably  than  other  banks  to  circu- 
late the  currency  notes  among  the  people. 
No  one  has  ever  given  them  credit  for  doing 
that.  But  the  severest  criticism  on  the  na- 
tional banks  has  been  because  of  the  inequi- 
table distribution  of  their  circulating  notes. 
It  was  because  of  that  bad  feature  of  the 
national  bank  that  the  Greenback  movement 
was  started  as  early  as  1865.  And  the  agita- 
tion then  begun  was  sufficient  to  prevent 
any  of  the  banks  from  attempting  to  tamper 
with  the  volume  of  the  currency,  as  was  so  suc- 
cessfully attempted  with  gold  coin  on  that 
memorable  Black  Friday.  Had  there  been 
no  Government  guarantee  of  redemption  of 
paper  money.  Black  Friday  would  have  been 
impossible. 

Currency  promotes  exchange  of  commod- 
ities; lack  of  currency  restricts  exchange  and 
causes  stagnation  in  trade.  Stagnation  in 
trade  causes  a  reduction  in  the  selling  prices  of 


122  FREE  BANKING. 

commodities,  and  if  such  stagnation  be  long 
continued,  the  reduction  is  to  that  low  point 
at  which  such  commodities  cannot  be  dupli- 
cated; for  labor's  reward,  in  the  operation 
of  duplication,  would  not  sustain  life. 

This  well-known  law  of  trade  insures  a 
profit  to  the  capitalist  when  withholding  cur- 
rency from  tradesmen,  although  idle  money 
ceases  to  be  interest-bearing  during  the 
period  it  is  withheld  from  circulation.  When 
commodities  are  forced  upon  the  market  at 
from  twenty-five  per  cent,  to  sixty  per  cent, 
below  the  cost  of  production,  capitalists  may 
and  generally  do  reap  rich  rewards.  The 
shrinkage  of  values  following  the  contraction 
of  the  currency  under  Secretary  McCullough 
was  probably  far  in  excess  of  the  amount  of 
national  debt  at  that  time. 

Even  if  the  bank  ofBcials  had  exerted  all 
their  forces  equitably  to  distribute  their  cur- 
rency notes  throughout  the  country,  it  was  not 
in  their  power  to  do  so,  because  the  natural  law 
of  trade,  in  times  of  stringency,  tends  to  the 
concentration  of  the  money  of  a  country  to 
the  financially  stronger  centers,  where  it  really 
is  least  needed.  And  thus  the  drain  is  from 
the  financially  weaker  centers,  where  it  is 
most  needed.  There  is  absolutely  no  flexi- 
bility in  the  national-bank  currency,  and  to 
meet  an  extraordinary  demand  it  could  not  be 


FREE  BANKING.  123 

expanded.  In  this  respect  the  national  bank- 
ing system  is  defective.  And  that  fault  has 
been  most  keenly  felt  throughout  the  country 
during  the  last  thirty  years.  This,  too,  is  a 
fault  so  grievous  that  it  constitutes  the  present 
national  banking  system — ^not  "  a  great  bless- 
ing," but  a  real  calamity. 

The  objection  to  free  banking,  or  to  a  re- 
striction of  a  monopoly  of  the  national  bank, 
or  to  the  Government  abandoning  the  bank- 
ing business,  seems  to  rest  largely  upon  the 
theory  that  the  money  issued  by  free  banks 
will  prove  inconvenient  money  to  travel  with. 

The  fact  is,  the  great  majority  of  the  Ameri- 
can people  do  not  travel  far  enough  from  their 
own  home  to  carry  a  good  bank  bill  beyond 
the  range  of  its  face  value.  Only  the  foolish 
or  dishonest  would  attempt  to  travel  by  using 
worthless  bank  bills.  If  they  lived  in  the 
immediate  vicinity  of  a  bank  and  the  bills  of 
that  bank  were  not  at  par,  it  would  be  because 
the  managers  of  that  bank  had  not  inspired 
the  people  living  within  its  vicinity — who 
knew  them  well — with  implicit  confidence. 
Such  banks  could  not  circulate  their  bills;  the 
people,  distrusting  those  who  managed  the 
bank,  would  not  accept  them. 

If  the  State  bank  or  the  free  bank  would 
stimulate  healthy  business  in  its  immediate 
neighborhood,  the  amount  of  the  benefit  de- 


124  FREE  BANKING. 

rived  from  that  stimulation  would  unquestion- 
ably be  infinitely  more  profitable  than  would 
be  the  loss  from  the  inconvenience  arising 
from  the  State-bank  notes  not  being  as  con- 
venient a  currency  with  which  to  travel. 

It  is  not  necessary  to  enter  into  any  argu- 
ment to  prove  the  necessity  for  the  use  of 
paper  money.  To  an  extent  yet  unheard  of 
business  could  be  conducted  or  managed  with- 
out a  single  coin,  or  without  a  currency  based 
upon  the  value  of  coin.  Coin  values  fluctu- 
ate, and  the  cause  of  that  fluctuation  is  the 
supply  and  demand  of  the  precious  metal.  A 
Secretary  of  the  Treasury  of  the  United  States, 
shortly  after  the  discovery  of  the  immense 
gold  fields  in  California,  in  a  serious  public 
paper  addressed  to  the  President  of  the 
United  States,  expressed  alarm  because  of  a 
calamity  likely  to  fall  upon  the  country, — 
from  the  cheap  gold  of  the  new  mines  driving 
silver  out  of  the  country.  Less  than  a  quarter 
of  a  century  later,  another  Secretary  of  the 
Treasury  addressed  a  similar  communication 
to  the  President,  in  which  he  deplores  the 
calamity  likely  to  fall  upon  the  country  from 
cheap  silver  depleting  the  country  of  its  gold. 
The  fact  is,  neither  gold  nor  silver  is  essential 
to  the  successful  conducting  of  the  business 
of  the  country.  That  is  a  fallacy  that  has 
twice  within  this  century  nearly  wrecked  the 


FREE  BANKING.  125 

Bank  of  England.  And  each  time  the  disas- 
ter was  averted  by  the  use  of  paper  money. 

Business  is  conducted  now,  not  by  man's 
faith  in  the  value  of  a  coin,  but  by  man's  faith 
in  his  fellow-man.  A  business  man  of  to-day 
trusts  his  fellow-man,  not  because  that  man 
has  gold,  but  because  he  has  business  and  per- 
sonal integrity.  Man's  faith  in  his  fellow- 
man  is  to-day  the  foundation  upon  which 
business  rests;  and  checks,  bank  notes,  and 
promises  to  pay  are  essentially  necessary  only 
to  make  the  wheels  of  business  run  smoothly. 

The  bank  located  in  the  country  districts 
does  not,  under  the  present  system,  afford  to 
the  farmer  or  country  operator  any  accom- 
modation whatever  except  when  money  is 
cheap.  In  straitened  financial  times,  when 
the  farmer  or  country  manufacturer,  as  well 
as  the  merchant,  needs  financially  bridging 
over,  he  can  get  but  very  little  assist- 
ance from  the  bank;  and  the  reason  of 
it  is  clear.  The  circulating  medium  is 
gathered  to  the  money  centers  as  soon 
as  any  stringency  in  the  money  market  be- 
comes apparent ;  and  however  firm  may  be  the 
bank  officers'  faith  in  the  business  tact  and  the 
personal  integrity  of  the  country  farmer 
or  the  country  merchant,  it  is  not  within 
their  power  to  lend  him  money;  the  demand 
from  the  money  centers  having  exhausted  the 


126  FREE   BANKING. 

supply  of  bank  bills  to  the  lowest  point  that 
it  is  possible  for  the  bank  to  reach  and  yet 
live. 

The  argument  that  the  notes  of  State  banks 
would  be  more  likely  to  be  kept  at  home  than 
either  the  Government  fiat  notes  or  the 
national-bank  bills,  many  financiers  dismiss 
with  a  sneer.  Mr.  Blaine  said,  *'  We  would 
keep  it — State-bank  money — at  home,  because 
it  would  be  so  worthless  nobody  would  take 
it  abroad."  No  one  of  good  judgment  would 
take  State-bank  bills  abroad  to  pay  traveling 
expenses  with,  because  only  very  few  with 
whom  one  would  have  to  transact  business 
would  have  sufficient  confidence  in  the  genu- 
ine character  of  the  bill,  or  confidence  enough 
in  its  maker,  to  accept  it  in  payment,  especially 
as  payment  could  be  exacted  in  a  currency 
with  which  they  were  perfectly  conversant. 
This  objection  to  State-bank  notes  applies 
with  equal  force  to  national-bank  bills,  and 
to  Bank  of  England  notes,  excepting  that 
those  notes  have  a  wider  range  of  ac- 
quaintances. Yet  at  the  proper  distance 
from  or  nearness  to  the  place  of  issuance, 
any  of  those  bills  are  readily  exchange- 
able for  currency  that  will  be  acceptable  in 
that  quarter  of  the  world  to  which  the  traveler 
may  wish  to  go.  If  a  traveler  be  not  suffi- 
ciently   intelligent    to    effect    such    an    ex- 


FREE  BANKING.  127 

change  before  he  sets  out  upon  his  jour- 
ney, he  would,  under  any  proAasion  of 
Government  for  his  protection,  most  probably 
be  put  to  much  loss  and  great  inconvenience 
before  he  got  very  far  on  his  way  in  the  dis- 
tant country  through  which  he  was  to  travel. 
Had  he  a  pocketful  of  gold  disks,  each  of 
the  value  of  ten  dollars,  their  purity  attested 
by  a  stamp  of  the  bankers  Rothschilds,  not  one 
out  of  each  hundred  men  and  women  he  met 
in  a  business  way  would,  on  the  security  of 
one  of  those  gold  disks,  trust  him  out  of  their 
sight  with  fifty  cents'  worth  of  commodities. 
There  are,  doubtless,  many  counties  in  this 
American  Union  where  not  a  business  man 
has  any  knowledge  of  the  appearance  of  a 
Bank  of  England  note;  and  not  a  hotel  keeper 
in  many  of  the  counties  would  trust  a  traveler 
with  a  night's  lodging  on  the  security  of  a  ten- 
pound  note  of  that  bank,  unless  there  was 
something  about  the  traveler  himself  that  im- 
pressed the  hotel  keeper  with  faith  in  his  in- 
tegrity. Over  all  this  land  there  are  thousands 
of  places  where  men  are  trusted  upon  the 
lines  in  their  faces  alone,  whereas  a  bagful  of 
notes  of  the  Bank  of  France  would  not  pro- 
mote the  credit  of  a  dollar. 

A  circulating  currency  for  the  benefit  of 
travelers  is  not  what  is  wanted,  but  a  currency 
for  the  benefit  of  people  who  stay  at  home, 


I2S  FREE   BAXA'IXG. 

who  form  business  communities,  who  transact 
the  business,  and  develop  the  possibiHties  of 
such  communities.  And  a  currency  that  is 
most  convenient  for  travelers  is.  in  times  of 
financial  distress,  almost  certain  to  be  least 
beneficial  to  small,  undeveloped  communities. 
It  is  that  feature  of  the  State  bank, — that  its 
currency  \\\\\  stay  at  home, — which  many  deem 
worthy  of  a  sneer  only, — that  is  alone  of  any 
real  value  in  any  bank,  excepting  the  benefit 
derived  from  a  bank  of  deposit,  and  from  the 
convenience  of  the  check  system  offered  to 
the  business  public  by  such  banks. 

The  simple  fiat  money  of  the  Government 
may  be  the  most  convenient  money  for  people 
traveling  through  the  countr}-  that  issues  it. 
There  is  no  logical  objection  to  a  limited 
quantity  of  such  currency  issued  on  a  basis  of 
taxation,  and  made  legal  tender  for  taxes, 
but  not  for  private  debts. 

Xational-bank  bills  have  no  advantage  over 
the  bills  of  a  State  bank,  excepting  that  given 
them  by  the  guarantee  of  the  Government — 
that  their  face  values  will  be  paid  in  legal-ten- 
der money.  It  is  nothing  more  nor  less  than 
fiat  money.  Xo  responsibihty  rests  upon  any 
individual  should  those  notes  not  be  paid  in 
coin  values,  adjusted  by  the  commercial  world 
on  the  basis  of  bullion  \'alues  of  the  precious 
metals.     There  is  no  provision  for  the  redemp- 


FREE  BANKING,  1 29 

tion  of  those  bills  in  gold  if  the  struggle  of 
free-silver  coiners  were  to  result  in  the  triumph 
of  the  silver  party.  Should  that  happen,  the 
value  of  the  American  gold  dollar  will  possibly 
be  appreciated  fully  sixty  per  cent.  Under 
the  discount  of  a  fraction  of  one  per  cent,  it 
would  soon  be  withdrawn  from  circulation, 
and  the  American  legal-tender  note,  based  on 
silver  bullion,  would  then  be  discounted  in 
Europe  at  a  rate  regulated  wholly  by  the 
value  of  buHion  silver. 

That  the  currency  bills  of  State  and  private 
banks  are  more  likely  to  remain  in  circula- 
tion near  their  point  of  issue  than  Government 
notes  or  national-bank  bills,  is  a  well-attested 
fact.  And  that  fact  makes  these  private  and 
State-bank  notes  vastly  superior  to  the  Gov- 
ernment bill.  For,  it  was  the  very  purpose 
for  which  that  bill  was  passed  that  those 
private  and  State  banks  or  a  bank  of  the 
national-bank  system  were  constituted.  This 
primarily  was  for  the  convenience  of  the 
people  living  near  such  banks,  and  to  develop 
more  thoroughly  the  possibilities  of  the  com- 
munities in  which  they  were  located. 

It  has  been  shown  that,  under  the  national- 
bank  system,  currency  bills — money — at 
times  were  attracted  away  from  those  locali- 
ties where  the  greatest  real  necessity  for  their 
presence  existed,  to  localities  of  more  financial 


ISO  FREE  BANKING. 

force  but  of  less  necessity;  and  always  at  a 
great  inconvenience  and  cost  to  the  people 
living  in  these  financially  weaker  localities. 
Such  would  not  be  the  case  with  State-bank 
bills.  This  an  apt  illustration  will  plainly 
show. 

A  State  bank  of  Delaware,  under  a  system 
of  banking  so  radically  liberal  as  to  appall 
many  conservative  bankers  of  the  hour,  was 
chartered  with  the  privilege  of  issuing  three 
dollars  in  currency  bills  for  each  dollar  in  coin, 
legal-tender  currency  of  the  United  States, 
that  was  held  by  the  bank  in  its  vaults.  Of 
course  there  were  conditions  imposed  on 
the  officers  of  the  bank  to  secure  safety  of  the 
bank-note  holders,  but  so  far  only  as  police- 
regulation  laws  for  collection  of  debts  can  se- 
cure. Tliose  bills  could  be  issued  only  on 
ample  security  that  they  would,  when  returned 
to  the  bank  in  the  course  of  trade,  be  re- 
deemed at  their  full  face  value.  Such  bills 
could  lawfully  be  paid  out  only  to  depositors 
in  the  place  of  money  they  had  already  depos- 
ited in  the  bank,  or  on  notes  indorsed  by  ac- 
ceptable indorsers,  or  for  other  reasonable 
securities.  The  loans  made  on  notes  were 
made  by  bank  officers  who  were  personally 
acquainted  with  the  maker  of  the  note,  whose 
business  and  private  habits  were  thoroughly 
known    to    them.     Consequently,    **  honesty, 


FREE  BANKING.  131 

sobriety,  economy,  and  good  business  habits  " 
were,  when  taken  collectively,  really  bankable 
values,  and,  substantially,  were  capital. 

Men  possessing  such  capital  should  be  en- 
couraged to  exert  their  talent  and  wealth  to 
develop  the  possibilities  of  the  communities 
in  which  they  live. 

And  that  is  what  that  bank  and  other  like 
banks  in  Delaware  did,  before  they  were 
throttled  by  the  bank-note  tax  of  1866.  It 
was  not  State  pride  nor  patriotism  that 
prompted  the  managers  of  those  banks  to 
encourage— by  lending  their  bills— those 
sober,  honest,  economical,  and  capable  busi- 
ness men  to  develop  the  possibilities  of  their 
communities.  Patriotism,  more  frequently 
than  otherwise,  when  reduced  to  the  basis  of 
dollars  and  cents,  is  a  low-priced  article.  It 
was  from  the  interest-money  that  the  bank 
managers  could  gather  from  lending  their  cur- 
rency that  they  derived  their  profits.  And  as 
the  currency  bills  would  not  be  accepted  at 
face  value  very  far  from  the  banking  house, 
it  was  necessary  for  the  bank  managers  to  en- 
courage business  men  within  the  limits  of 
their  acquaintance  and  locality  to  develop 
those  industries  that  would  demand  the  use 
of  the  currency  bills.  It  was  of  little  advan- 
tage for  such  banks  to  lend  their  bills  to  some- 
one living  in  a  remote  community.     Had  the 


132  FREE  BANKING. 

officers  of  the  Bank  of  Dover,  in  illustration, 
lent  five  thousand  dollars  face  value  of  their 
bills  to  a  man  engaged  in  developing  an  enter- 
prise in  Lancaster  County,  Pennsylvania,  that 
man  would  in  all  probability  have  deposited 
those  bills  in  a  Lancaster  County  bank,  and, 
although  the  Lancaster  County  bank  presi- 
dent may  have  been  an  intimate  friend  of  the 
president  of  the  Bank  of  Dover, — with  the 
uttermost  confidence  in  his  integrity — those 
Dover  Bank  bills  would  have  been  sent  with 
thte  speediest  dispatch  back  tO'  that  bank. 
Such  is  the  force  of  the  law  of  trade.  The 
bills  of  the  Bank  of  Dover  were  only  certifi- 
cates of  credit.  Only  by  lending  its  credit 
could  the  Bank  of  Dover  make  a  profit  on  the 
loan  made  to  the  Lancaster  County  man.  If 
the  certificates  of  credit  were  returned  to  the 
bank,  and  legal-tender  money  demanded  for 
them  within  three  days,  it  follows  that  the 
Bank  of  Dover  lent  its  credit  for  three  days, 
and  could  realize  therefrom  only  the  interest 
on  a  three  days'  loan,  in  which  transaction  of 
course  there  would  be  no  profit.  The  Bank 
of  Dover  could  not  have  been  profitably  con- 
ducted if  the  business  of  the  bank  had  not 
been  confined  to  the  immediate  vicinity  of 
Dover,  where  bills  of  that  bank  furnished  the 
currency  of  the  community,  and  where  the 
greater  part  of  the  bills — money — deposited 


FREE  BANKING.  133 

by  the  business  men  as  security  for  the  pay- 
ment of  the  checks  or  drafts  drawn  on  that 
bank  by  its  depositors,  were  notes  of  the  Bank 
of  Dover,  and,  as  profit-making  bills  while  in 
its  vaults,  were  as  valuable  to  that  bank  as  if 
in  the  pockets  of  the  various  members  of  the 
community  of  Dover.  To  lend  its  credit  to 
persons  engaged  in  developing  the  business 
possibilities  of  the  vicinity  of  Dover,  was  abso- 
lutely necessary  for  the  existence  of  that  bank, 
and  consequently  the  most  active  motive  of  its 
officers  was  to  induce  persons  to  encourage 
the  business  activity  in  the  vicinity  of  Dover. 

Under  the  banking  system  of  to-day,  be- 
yond the  encouragement  that  interest-making 
may  prompt  bank  managers  to  extend  ac- 
commodations to  their  depositors,  there  is  no 
motive  to  prompt  managers  of  banks  to  dis- 
criminate between  lending  money  to  the  busi- 
ness men  of  their  own  centers  and  to  a  man  in 
a  center  hundreds  of  miles  away. 

It  is  urged,  as  an  objection  to  any  form  of 
free  banking,  that  there  is  too  great  an  in- 
ducement to  an  overissue  of  bank  bills.  Ful- 
lerton,  in  his  "  Regulation  of  Currency,"  p. 
83,  says:  ''It  may  be  stated,  therefore,  as  a 
settled  principle,  that  the  efforts  of  banks  of 
issue  to  extend  their  circulation  know  no  re- 
mission; that  the  whole  system,  in  fact,  is 
continually  on  the  stretch,  and  that  but  for 


134  FREE  BANKING. 

the  antagonistic  force  which  is  always  in 
action  to  correct  and  repress  it,  the  overflow 
of  notes  would  be  irresistible.  Upon  this 
ground  alone,  then,  there  seems  to  me  to  be 
an  effectual  negative  to  the  supposition  that 
the  fluctuation  of  the  bank-note  circulation 
depends  on  the  discretion  of  the  bankers.  A 
man  who  always  puts  forth  his  whole  strength 
has  no  further  effort  left  to  make." 

Bankers  who  purpose  to  make  a  profit  from 
the  sale  of  their  financial  credit  cannot  afford 
to  impair  that  credit,  and  from  that  ''  force  " 
— antagonistic  to  an  overissue  of  bills — they 
will  not  lend  their  credit — their  bills — to  those 
thiey  believe  will  not  return  it  or  proper  sub- 
stitutes in  payment  of  the  discounted  notes  on 
which  the  loan  was  made.  They  will  not  will- 
ingly make  unsafe  loans,  because  they  cannot 
conduct  their  bank  successfully  if  they  do. 
There  can  be  no  stronger  reason  given  why 
an  overissue  of  currency  bills  is  nearly 
impossible.  Should  the  bank  officers  at- 
tempt an  overissue,  by  lending  money  to 
reckless  men,  it  would  at  once  impair 
the  credit  of  the  bank  to  such  an  extent 
that  depositors  would  decline  to  do  business 
with  it,  and  reputable  business  men  who  bor- 
row from  banks  on  the  semi-official  assurance 
of  its  managers — that  at  the  time  of  payment 
their  paper  will  be  extended  if  conditions  be 


FREE  BANKING.  135 

favorable — would  not  trust  their  enterprise  on 
the  promise  of  such  men.  Consequently, 
such  a  bank  could  not  keep  its  notes  in  circu- 
lation or  do  a  banking  business.  A  banker 
cannot  sell  his  credit  to  a  community  that  has 
no  faith  in  the  integrity  or  good  judgment  of 
the  banker;  because  that  credit  is  of  no  value. 
Bills  issued  by  such  a  banker  would  not  pass 
current  in  the  community — consequently 
could  not  be  put  into  circulation.  Even  such 
good  paper  currency  as  that  of  Canada  cannot 
be  circulated  in  the  United  States.  Therefore 
the  assumption  that  irresponsible  bankers  can 
circulate  their  notes  is  an  absurdity. 

While  the  active  motive  that  controls  the 
banker  is  to  issue  as  many  bills  as  possible, 
he  is,  nevertheless,  restrained  by  well-estab- 
lished business  principles  of  value  for  value 
from  overissuing  them.  Hence  there  would 
be  issued,  even  under  such  a  "wild-cat"  bank- 
ing system  as  that  of  the  illustrative  Bank  of 
Dover,  only  the  amount  of  currency  demanded 
by  the  safe  business  interests  of  the  com- 
munity in  whose  interest  the  bank  had  been 
organized.  No  more,  no  less.  And  the  ex- 
pansion and  contraction  of  the  circulating  cur- 
rency in  such  a  community  would  be  governed 
entirely  by  the  safe  business  requirements  of 
that  community. 

The  local  bank,  whether  a  State  or  a  private 


136  FREE  BANKING. 

bank,  the  payment  of  whose  notes  is  not  guar- 
anteed by  the  Government  of  a  great  central 
bank  is,  for  reasons  already  shown,  the  most 
desirable  bank  to  promote  business  possibili- 
ties in  the  locality  in  which  it  is  situated. 
And,  further,  as  it  works  no  unjust  disadvan- 
tage to  any  other  bank  located  within  its  own 
or  any  other  locality,  it  is  therefore  the  best 
possible  form  of  banking  for  that  locality. 
Collectively,  such  banks  are  the  best  adapted, 
justly  and  vigorously,  to  develop  the  business 
possibilities  of  the  entire  country. 


CHAPTER  VII. 

In  dealing  with  the  currency  question  it  is 
proper,  it  is  imperative,  that  the  question 
should  be  considered  from  the  view-point 
of  justice.  If  justice  demand  the  demoni- 
tization  of  silver,  with  its  subsequent  ap- 
preciation of  the  purchasing  power  of 
gold,  then,  only  lasting  good  can  come 
to  the  country  from  placing  our  currency 
on  the  basis  of  gold.  If,  on  the  other 
hand,  the  unlimited  coinage  of  silver,  with 
its  consequent  debasement  of  purchasing 
power  of  our  unit  be  just,  the  nation  should 
at  once  resort  to  free  coinage,  and  coin  into 
money  all  the  silver  that  would  be  offered  to 
it  for  that  purpose,  and  in  the  coinage  use 
such  energy  that  all  the  silver  offered  for 
coinage  should  be  converted  into  coin  at  the 
speediest  possible  rate. 

There  can  be  no  doubt  that  to  make  those 
silver  dollars  fast  enough,  such  unlimited 
coinage  of  silver,  which  permitted  a  holder 
of  one  thousand  dollars'  worth  of  silver 
bullion  to  pay.  two  thousand  dollars  of 
debts,  would  make  great  demands  upon  the 
137 


138  FREE  BANKING. 

facilities  of  the  mints.  There  is  but  little 
doubt  that  silver  bullion  would  advance  in 
price;  for  a  time,  at  least.  If,  therefore,  the 
purchasing  power  of  silver  bullion  should, 
under  such  influence,  steadily  increase  until 
sixteen  ounces  of  it  would  purchase  the  same 
quantity  of  commodities  that  one  ounce  of 
gold  would,  the  purchasing  power  of  gold  not 
having  been  disturbed  in  the  meantime,  no 
permanent  enhancement  of  other  values 
would,  of  course,  take  place,  and,  conse- 
quently, only  the  few  who  pay  their  debts, 
and  the  bullion  holders,  and  the  silver  miners 
would  be  benefited  by  the  free  coinage  of 
silver.  If  the  purchasing  power  of  gold 
would  be  depreciated  under  the  influence  of 
free-silver  coinage,  and  the  values  of  other 
commodities  be  appreciated,  as  would  proba- 
bly be  the  case,  all  possessors  of  commodities 
would  reap  a  benefit  that  probably  might 
greatly  stimulate  business. 

There  are  two  distinct  classes  in  every  civi- 
lized land,  and  doubtless  such  classes  will 
exist  as  long  as  civilization  lasts;  they  are  the 
debtor  and  the  creditor.  The  misfortunes  of 
the  debtor  class  offer  no  logical  reason  why 
superior  advantage  should  be  granted  to 
them;  nor  do  the  wealth  and  the  influence 
that  wealth  gives  offer  any  reason  why 
such    advantage    should    be    given    to    the 


FREE  BANKING.  139 

creditor  class,  although  they  may  be,  as 
many  of  their  friends  assert  they  are,  God's 
natural  leaders  of  the  people.  If  to  frame 
laws  to  provide  currency  for  the  people  it  is 
necessary  that  special  privileges  should  be  ex- 
tended to  the  one  or  the  other  of  these  two 
classes,  it  is  proper,  then,  that  we  determine 
which  of  these  two  classes  best  serve  the  in- 
terest of  the  country.  If,  in  the  considera- 
tion of  this  matter,  we  would  be  governed  by 
the  words  of  the  Divine  Master,  there  is  then 
no  question  that  we  should  legislate  so  that 
the  burden  would  fall  lightly,  if  at  all,  upon 
the  debtor  class.  Philanthropy,  Christianity, 
and  selfish  brutality,  on  the  other  hand,  all 
unite  in  declaring  that  if  either  the  debtor  or 
the  creditor  class  must  sufifer  by  currency 
legislation,  the  burden  should  fall  entirely 
upon  the  creditor  class. 

However,  before  arriving  at  a  conclusion, 
it  is  well  first  to  consider  which  of  the  two 
classes  are  of  the  greatest  benefit  to  the  entire 
people;  which  of  these  two  classes  add  to  the 
country's  ornamentation,  to  the  glories  that 
clothe  our  person  in  comfort  and  fill  our  soul 
with  pride.  Is  it  the  debtor  or  the  creditor 
class?     Is  It  the  user  or  the  lender  of  money? 

Of  the  people  endowed  by  their  Creator 
with  a  modicum  of  common  sense  but  few 
assert  that  such  credit  belongs  principally  to 


I40  FREE  BANKING. 

the  creditor  class.  This,  of  course,  is  not  in- 
tended as  a  reflection  on  that  class.  For  the 
man  who  has  reached  that  point  in  life  at 
which  he  can  begin  to  lend  money,  and  thus 
become  a  creditor,  is  to  be  respected,  if,  of 
course,  he  have  reached  that  point  by  indus- 
trious and  honorable  methods.  Nor  is  he  to 
be  despised  because  some  energ-etic  ancestor 
provided  him  with  the  privilege  of  being  a 
creditor  all  the  days  of  his  life.  But  to  as- 
cribe superior  usefulness  to  such  persons  is 
simply  adulation,  absurdity,  or  imbecility. 

The  creditor  seeks  to  lend  money,  and  the 
energy  used  in  seeking  such  investments  is, 
more  frequently  than  otherwise,  a  hired  agent 
of  the  creditor.  Consequently,  a  creditor 
does  not  seek  to  lend  his  money  in  order  that 
some  enterprise,  needed  to  develop  the  coun- 
try, should  be  promoted,  but  rather  that  to 
the  creditor  there  should  be  a  handsome  re- 
turn for  the  money  advanced.  It  is  true  that 
there  are  a  few  men  in  the  land  possessed  of 
capital  who  would  prefer  lending  money  in 
their  own  country  to  lending  it  to  people  liv- 
ing in  other  countries  for  higher  rates  of 
interest  when  absolutely  certain  that  the  in- 
vestment in  either  country  would  be  safe. 
The  generous  public  denominates  such  men 
cranks.  Not  one-hundredth  part  of  one  per 
cent,  of  the  capital  of  the  country  held  by  the 


FREE  BANKING.  141 

creditor  class  would  be  lent  for  business 
operations  in  the  country  if  it  were  given  an 
investment  as  absolutely  safe,  and  as  con- 
venient, outside  the  country  at  a  higher  rate 
of  interest.  Therefore,  to  claim  that  the 
creditor  class  is  entitled  to  special  benefits, 
because  it  is  the  leader  selected  to  direct  the 
business  of  the  country  in  such  channels  as  are 
calculated  to  make  it  prosperous,  is  simply 
absurd. 

For  the  same  selfish  reasons,  perhaps,  the 
man  of  the  debtor  class  who  borrows  money 
does  so  that  he  may  grow  richer  and  have 
more  comforts.  But  to  do  so  it  is  then  neces- 
sary for  him  to  put  forth  an  hitherto  undevel- 
oped energy ;  an  energy  that  can  be  developed 
only  by  the  help  of  additional  capital.  He 
does  not,  it  is  true,  seek  to  build  up  a  great 
factory  and  extend  his  operations  over  the 
States  and  Territories  for  the  sole  purpose  of 
advancing  the  prosperity  of  the  country,  but 
he  does  advance  it,  nevertheless,  and  he  has 
no  opportunity  to  shift  his  field  of  operation, 
as  the  creditor  has.  He  stands  very  much  in 
the  same  position  that  the  boy  did  who  was 
digging  out  the  woodchuck — had  to  get  that' 
woodchuck;  because, ''  no  woodchuck,  no  din- 
ner." So  it  is,  therefore,  from  the  energy  and 
intelligence  of  the  debtor  class  that  the  ma- 
terial prosperity  of  the  land  must  come. 


142  FREE  BANKING. 

Nor  is  the  creditor  class  essential  to  the 
material  prosperity  of  the  land.  The  great 
West  was  built  up  and  made  rich  and  fertile 
without  any  assistance  from  the  creditor.  And 
after  it  had  become  rich,  after  its  miles  upon 
miles  of  prairie  lands  were  made  fertile,  under 
the  manipulation  of  earnest  energy,  after 
towns  and  cities  had  covered  it,  capital  was 
directed  thither  largely  from  the  East;  and  the 
Western  people  to-day  assert  that  the  intro- 
duction of  money-lenders  among  them  was  the 
beginning  of  the  ruin  and  disaster  that  have 
laid  the  West  in  the  position  it  now  occupies 
— of  almost  enslavement  to  Eastern  capital. 

If,  in  legislating,  we  should  be  governed  by 
the  principle  of  ''  the  greatest  good  to  the 
greatest  number,"  we  would  be  induced  to 
lend  the  greatest  assistance  to  the  debtor  class. 
To  just  what  extent  the  debtor  class  outnum- 
bers the  creditor  class,  or  that  part  of  it  that 
sells  or  rents  to  others  the  use  of  money,  it  is 
difficult  to  ascertain.  But  that  it  does  out- 
number them —  and  very  largely  so — is  a  fact 
no  one  can  gainsay.  Therefore,  "  good  poli- 
tics "  would  direct  that  legislation  on  the 
subject  of  currency  should  be  toward  lessen- 
ing the  burdens  of  the  debtor  class.  It  is  not 
easy  to  determine  who  are  the  debtors  and 
who  are  the  creditors;  for  in  every  avenue  of 
trade  the  products  of  the  operator  become 


FREE  BANKING.  I43 

his  debtor,  and  he  is  the  creditor  of  his 
products. 

The  builder  of  machinery  who  spends  days 
and  weeks  in  developing  a  machine  finds, 
when  he  finishes  it,  that  all  the  energy  he  has 
expended  is  represented  in  the  machine  that 
he  has  produced.  That  machine  is  his 
debtor,  he  is  the  creditor.  If  legislation  is  so 
shaped — assuming  that  legislation  can  affect 
the  value  of  that  machine — that  the  result  of 
this  man's  labor  is  enhanced  in  value,  he 
reaps  a  greater  reward  as  creditor;  but  if,  to 
the  contrary,  legislation  is  so  manipulated 
that  the  value  of  the  machine  is  depreciated, 
he  becomes  so  much  the  poorer.  This  illus- 
tration is  used  to  demonstrate  the  fact  that,  if 
even  but  one  individual  be  working  as  his  own 
master  to  produce  commodities  that  other 
men  require,  he  may  be  seriously  afifected  by 
pernicious  laws. 

The  farmer  who  spends  a  year's  labor,  or  at 
least  waits  a  year  to  produce  his  crop,  also 
finds  himself  either  reaping  the  reward  or 
suffering  the  calamities  that  arise  from  favor- 
able or  unfavorable  legislation.  He  pur- 
chases his  fertilizers  in  the  month  of  August, 
at  a  price  that  is  made  by  a  given  standard. 
He  lends  it  to  the  land,  to  be  repaid  for  it  by 
the  crop  harvested  in  the  following  July.  If 
the  standard  of  value,  by  any  cause  whatso- 


144  FREE  BANKING. 

ever,  be  changed  within  that  year,  the  farmer 
receives  his  pay  from  the  harvest  at  a  different 
rate,  unless  that  which  he  produces  should 
have  its  value  appreciated  exactly  in  the  line 
with  the  change  in  the  value  of  the  measure — 
money. 

However,  if  that  farmer  should  contract  to 
pay  for  the  fertilizers  to  be  used  on  his 
ground  with  the  proceeds  of  the  sales  of  the 
harvest,  and  the  standard  of  value  should,  in 
the  meantime,  be  changed  in  a  direction  that 
made  it  more  difficult  for  him  to  obtain  the 
money,  or,  in  other  words,  that  compelled  him 
to  sell  more  of  the  products  of  his  farm  and 
labor  to  procure  it  than  at  the  time  of  the  pur- 
chase, it  follows,  then,  that  the  farmer  has  an 
additional  burden  imposed  upon  him, — a  re- 
sult of  such  changes  in  the  money  measure 
that  he  was  not  called  upon  to  contemplate  at 
the  time  he  made  his  contract,  and  which 
strict  justice  does  not  demand  that  he  should 
pay. 

If  the  manufacturer  of  the  fertihzers  should, 
by  the  very  reverse  of  this  change  in  the  value 
of  money,  be  compelled  to  receive  less  than 
the  existing  conditions  then  made  just,  an 
injustice  would  be  done  to  the  manufacturer 
of  the  fertilizers. 

There  is  another  large  class  of  business 
men  that  it  would  be  very  difficult  to  class 


FREE  BANKING.  145 

either  with  the  debtors  or  the  creditors.  They 
are  those  dealers  in  merchandise  who  possess 
stocks  of  goods,  who  owe  money  for  goods 
purchased,  who  have  money  owing  to  them 
for  goods  sold.  It  is  fair  to  assume  that, 
aside  from  the  inconvenience  that  arises 
— we  may  say  momentarily — in  settling  bal- 
ances among  the  class  of  men  above  de- 
scribed, no  serious  inconvenience  could  be 
felt  by  them  either  by  the  appreciation  or  the 
depreciation  of  the  purchasing  power  of  the 
gold  dollar. 

From  the  appreciation  of  the  value  of  the 
dollar,  the  wage-earner  derives  an  advantage 
for  such  a  length  of  time  only  as  may  be  re- 
quired to  adjust  wages  to  the  old  unfortunate 
standard,  namely,  inst  as  small  a  sum  as  wage- 
payers  can  induce  wage-earners  to  work  for, 
which  sum  is  usually  measured  by  the  mini- 
mum of  man's  wants. 

Any  depreciation  of  the  value  of  the  Ameri- 
can dollar  would  work  to  the  disadvantage  of 
the  American  wage-earner,  thereby  materi- 
ally lessening  his  ability  to  procure  those 
things  that  go  to  make  life  comfortable.  The 
enforced  idler  can  derive  little,  if  any,  advan- 
tage from  it — none,  when  his  money  gives  out. 
If  the  old  wages  should  be  maintained  when 
that  dollar  had  depreciated  to  its  lowest  limit, 
then   wage-earners   would  be   reduced   to   a 


146  FREE  BANKING. 

greater  degree  of  privation  than  that  they  now 
are  compelled  to  endure.  If  the  depreciation 
of  the  dollar  be  carried  to  an  extent  beyond 
his  ability  to  purchase  those  comforts  of  life 
that  would  but  satisfy  his  wants,  he  would 
then  simply  begin  an  aggressive  movement 
for  increased  wages,  and  would  resort  to  those 
measures  that  in  the  past  have  been  success- 
ful in  attaining  such  objects.  And  from  the 
time  of  the  beginning  of  the  depreciation  of 
the  purchasing  power  of  the  dollar,  to  the 
time  that  resulted  in  an  adjustment  of  the 
w^ages,  and  back  again  from  that  period 
until  he  had  succeeded  in  placing  himself  on 
the  same  plane  of  the  purchasing  power  of 
wages  that  he  stands  on  to-day,  he  would  be 
the  loser  by  the  depreciation  of  the  purchas- 
ing power  of  our  dollar. 

A  uniform  fall  in  prices  is  not  the  result  of 
overproduction  of  commodities, — if  such  an 
economic  condition  be  possible, — but  of  an 
appreciation  of  the  value  of  the  standard 
measure.  Trading  with  the  assistance  of 
money  is  but  improved  bartering. 

If,  for  example,  certain  men  had  horses 
that  they  valued  at  one  hundred  units, 
and  other  men  possessed  oxen  that  they 
valued  at  the  same  number  of  units, 
and  these  valuations  were  mutual,  what 
difference   would   it  make  to  these  men   if. 


FREE  BACKING.  147 

when  they  desired  to  exchange  horses 
for  oxen,  those  horses  and  oxen  were  valued 
a  year  previously  at  one  hundred  and  fifty 
units?  And  if  all  the  other  commodities  use- 
ful to  man  had  from  the  preceding  year  depre- 
ciated to  a  greater  or  less  extent  than  horses 
and  oxen,  men  would  perforce  use  more  of 
those  commodities  than  in  the  preceding  year. 
There  would  be  no  overproduction.  But  if 
there  had  been  an  increased  demand  for  one 
of  those  commodities — gold — useful  to  man, 
and  that  commodity  had  been  selected  as  the 
standard,  the  demand  then  for  debt-paying 
and  interest  requirement  would  compel  many 
people  to  sell  their  oxen  and  horses  so  as  to 
procure  gold  to  meet  those  requirements. 
Men  could  not  exchange  oxen  for  horses; 
they  would  each  probably  be  compelled  to  ex- 
change the  greater  part  of  their  oxen  and 
horses  for  gold,  to  obtain  money  with  which 
to  pay  their  indebtedness;  an  indebtedness 
contracted  when  those  oxen  were  worth  one 
hundred  and  fifty  units. 

Falling  prices,  measured  by  labor's  com- 
pensation, invariably  cause  much  hardship  to 
those  of  our  citizens  who  have  borrowed 
money  for  industrial  improvements.  On  the 
other  hand,  they  certainly  add  to  the  reward 
of  those  who  live  upon  the  energy  of  others. 
Every  man,  woman,  and  child,  and  their  pet 


148  FREE  BANKING. 

animals  live  upon  the  energy  of  others  who 
derive  their  income  from  bonds,  mortgages, 
and  rents.  Nor  are  those  the  only  ones  liv- 
ing upon  the  energy  of  others.  The  fact  that 
men,  by  energy  and  sagacity,  may  reach  a 
condition  in  this  life  by  which  they  may  live 
comfortably  and  honored  upon  the  energy 
of  others  is  perhaps  the  most  active,  the 
most  useful  force  at  work  to  make  them  pro- 
gressive. 

The  creditor  class,  which  largely  controls 
the  use  of  money,  is  composed  of  those  people 
who  own  bank  stock  and  railroad  stock,  who 
hold  mortgages  against  other  property,  and 
own  real  estate,  and  owe  practically  no  debts. 
While  this  class  is  not  numerically  very  large, 
it  has  for  the  last  thirty  years  largely  influ- 
enced the  legislation  of  our  country.  It  is  un- 
questionably true  that  nearly  all  men  who  be- 
long to  this  class  are  in  favor  of  any  currency 
that  will  make  it  more  difficult  for  the  debtor 
class  to  pay  interest  on  any  debts  other 
than  those  guaranteed  by  safe  security.  There 
is  a  consensus  of  opinion  among  them, 
doubtless,  that  the  demonetizing  of  silver  and 
the  adopting  of  gold  as  the  single  standard  of 
measure  would  best  serve  their  ends. 

A  large  percentage  of  debtors  is  composed 
of  those  who  have  secured  loansi  upon  real 
property,  that  they  assume  they  will  not  be 


FREE  BANKING.  149 

compelled  to  pay  for  so  long  as  they  pay  the 
interest  demanded  for  the  loan,  and  maintain 
the  property  offered  as  security  in  the  same 
valuable  condition  as  it  was  at  the  time 
the  loan  was  effected.  This  represents  the 
enterprising,  struggling  man;  this  repre- 
sents those  who  have  purchased  lots  upon 
which  they  have  built  homes,  expecting  to 
pay  off  their  mortgages  a  little  at  a  time  until, 
from  their  savings,  they  may  be  enabled  to 
liquidate  the  entire  indebtedness  and  become 
sole  owner  of  the  property.  In  this  class  are 
many  small  dealers,  struggling  professional 
men,  and  wage-earners.  Another  portion,  and 
a  very  large  portion,  of  this  class  may  be 
found  in  the  agricultural  districts,  where 
young,  enterprising  men  have  purchased 
tracts  of  land  more  or  less  improved,  paying 
only  a  part  of  the  purchase  money,  and  placing 
a  mortgage  on  the  property  for  the  remainder. 
When  these  mortgages  are  made  on  such 
given  property  by  young  men,  they,  more  fre- 
quently than  otherwise,  calculate,  when  mak- 
ing that  purchase,  that  it  will  be  the  struggle 
of  their  life  to  release  themselves  from  this 
indebtedness.  In  other  words,  the  mort- 
gaged farm  stands  to  them  in  the  same  rela- 
tion that  the  savings  bank  stands  to  the  wage- 
earners;  it  is  the  means  by  which  they  can 
gradually  save  their  earnings. 


15°  FREE  BANKING. 

Hence,  it  requires  but  very  little  effort  of 
the  human  mind  to  reach  the  conclusion  that 
the  class  of  men  here  defined  as  the  debtor 
class  is  the  class  from  which  we  must  hope  that 
the  material  prosperity  of  our  country  shall  be 
advanced;  specially  when  we  add  to  it  another 
portion  of  the  debtor  class — the  manufactur- 
ers— which  erects  large  plants  for  producing 
those  commodities  that  society  demands  for 
its  comforts.  These  factories  are  almost  uni- 
versally erected  by  men  who  invest  less  than 
one-half  the  cost  of  them;  who  go  into  debt 
for  the  other  part.  Were  they  possessed  of 
the  idea  that  the  money  they  borrow  for  the 
beginning  of  such  industries  would  be  de- 
manded in  a  few  months,  or  even  a  few  years, 
many  of  those  enterprises  would  never  be  be- 
gun. Therefore,  it  is  a  fair  assumption  to  say 
that  the  material  progress  of  our  country  de- 
pends upon  the  energy  displayed  in  the  future, 
as  in  the  past,  by  men  w^ho  voluntarily  enter 
the  debtor  class. 

If  currency  legislation  must  be  so  shaped 
that  to  one  or  the  other  of  these  classes 
special  privileges  are  extended,  then  com- 
mon reason  demands  that  the  privilege  should 
be  extended  to  the  debtor  class. 


CHAPTER  VIII. 

The  value  of  money,  like  that  of  any 
other  commodity,  is  affected  by  the  law  of 
supply  and  demand.  Those  whose  wealth  is 
all  in  money  have  an  advantage  over  those 
whose  wealth  is  in  another  commodity.  The 
owners  of  money  may  readily  effect  an  ex- 
change for  any  one  or  more  of  the  thousands 
of  kinds  of  commodities  that  constitute  the 
wealth  of  the  world;  while  the  owners  of 
those  other  commodities  can  exchange  theirs 
for  money  only,  unless — which  so  frequently 
happens — they  can  satisfactorily  barter  with 
their  neighbors,  or  resort  to  warehouse- 
exchange  system,  by  giving  to  a  middleman  a 
part  of  their  commodities,  to  effect  for  them 
acceptable  exchanges.  The  latter  system  is 
practically  that  of  the  country  stores  already 
described.  Under  it,  communities  may  pros- 
per, people  be  healthfully  fed,  comfortably 
housed  and  clothed,  made  happy  and  fairly 
contented.  There  can,  however,  be  no 
marked  progress  in  such  communities,  a  dis- 
advantage, perhaps,  compensated  for  by  the 
general  exemption  from  poverty;  for  usually 


152  FREE  BANKING. 

there  is  in  unprogressive  communities  no  ab- 
ject poverty  unless  there  is  retrogression,  or 
as  a  consequence  of  dissolute  living.  But  this 
latter  is  not  commonly  indulged  in  where  such 
communities  exist. 

Money,  although  it  is  a  commodity,  pos- 
sesses a  privilege  or  a  purchasing  power  other 
commodities  do  not  possess.  It  is  this  privi- 
lege money  possesses  that  should  be  restricted 
within  its  legitimate  sphere.  If  a  certain 
number  of  money-owners — necessarily  but  few 
— control  the  supply  of  money  so  as  to  arti- 
ficially take  from  other  commodities  a  part  of 
their  value,  which  the  law  of  supply  and  de- 
mand for  those  commodities  would  not  have 
reduced,  it  follows,  then,  that  business  princi- 
ples, truth,  and  justice  alike,  demand  that  such 
power  of  money  should  be  limited  to  a  mini- 
mum if,  by  the  condition  of  things,  it  be 
impossible  to  restrict  it  entirely.  Money  can- 
not be  made  to  affect  the  values  of  other  com- 
modities so  long  as  it  remains  an  unchanged 
measure;  but,  unlike  the  yardstick,  the  unit 
of  money  is  not  an  inflexible  standard. 

Gold,  to-day,  is  the  money  measure  of  the 
world;  it  matters  not  which  metal  may  be 
the  standard  of  a  nation.  Gold  measures  the 
value  of  other  commodities,  not  as  the  index 
figures  on  the  thermometer  indicate  the  de- 
gree of  heat,  but  rather  as  the  mercury  meas- 


( 


OF  THg 

FREE  BANKINGr%S.  ,  .^l^\<^ 


ures  the  temperature.  The  figures  of  the 
thermometer  are  inflexible.  But  the  mercury 
in  the  glass  tube  is  not  more  flexible  in  indi- 
cating the  temperature  than  is  gold  in  meas- 
uring commodity  values.  So  energetic,  in 
fact,  is  the  fluctuation  of  the  value  of  gold 
that,  probably,  were  it  possible  to  gauge  it, 
not  a  minute  of  time  would  fail  to  disclose  a 
change.  Yet,  doubtless,  it  is  as  staple  in  its 
value  in  relation  to  the  mean  values  of  all 
other  commodities  as  any  other  single  com- 
modity could  ever  be  expected  to  be,  and  if 
a  single  commodity  be  most  desirable  as  a 
basis  for  money,  gold,  doubtless,  is  the  very 
best  that  could  be  selected.  The  advantage 
of  using  more  than  one  metal  as  a  basis  for 
money,  if  there  be  such  advantage,  lies  in  the 
fact  that  there  is  less  likelihood  to  be  any 
violent  changes  in  the  value  of  each  of  the 
metals  at  the  same  time;  and,  again,  that  the 
money-dealers  cannot  so  readily  command  the 
world's  production  of  two  commodities  as 
they  can  of  one.  It  may  be  forcibly  urged 
that,  if  to  the  world's  debtors  there  be  given 
always  the  option  of  the  two  metals  they  may 
use  for  the  paying  of  their  debts,  they  will 
invariably  use  the  cheaper;  and  that  at  times, 
when  extraordinary  productions  of  the  one 
and  not  a  lessening  of  the  productions  of  the 
other  cause  a  cheapening  of  the  value  of  that 


154  FREE  BANKING. 

metal,  the  debtors  would  not  be  obliged  to 
make  full  payment  for  values  received.  In- 
deed, if  an  option  of  paying  their  debts  with 
the  cheapest  of  these  metals  had  been  given 
tO'  the  debtors  by  the  laws  of  the  world  dur- 
ing the  past  twO'  hundred  years,  the  basis, 
then,  of  the  world's  money  to-day  would  be 
copper;  if  for  two  thousand  years,  it  would  be 
iron. 

Iron,  copper,  brass,  wood,  woven  fabrics 
are  all  used  as  substitutes  for  the  standard 
yardstick.  In  our  country  it  is  also  the  right 
of  every  purchaser  of  commodities  that  are 
sold  by  the  yard,  tO'  demand  that  the  yard- 
stick used  in  measuring  shall  be  of  exactly 
the  same  dimensions — or  value  as  a  measure 
— as  the  standard  yardstick  kept  by  the  Gov- 
ernment, which  is  securely  guarded  at  Wash- 
ington. That  yardstick  is  never  used  except 
to  measure  the  accuracy  of  other  yardsticks. 
The  yardsticks  in  use  are  made  of  almost 
every  conceivable  material,  and  are  all  sub- 
stitutes for  the  yardstick.  Even  those  that 
have  been  officially  stamped  as  yardsticks, 
may  be  questioned  as  accurate  standard  meas- 
ures; but  doubtless  ninety-nine  per  cent,  of 
the  volume  of  business  transacted  in  the 
United  States  where  yardsticks  are  needed, 
is  done  by  the  use  of  unstamped  and  un- 
guaranteed yardsticks.     On  the  other  hand, 


FREE  BANKING,  155 

the  proportion  of  short  measurement — ^be- 
cause of  wantonly-debased  yardsticks — is  so 
small  that  figures  will  scarcely  express  the 
minuteness  of  the  percentage. 

It  is  just  as  easy  to  use  a  substitute  for 
money  as  for  the  yardstick.  In  fact,  the  mer- 
chants of  the  present  time  would  scarcely  be 
able  to  transact  business  without  a  substitute 
for  money.  So  any  measure  that  seeks  to 
prevent  a  man  from  substituting  anything  that 
will  more  expeditiously  enable  him  by  the  use 
of  money  to  effect  exchanges  of  commodities, 
when  such  substitutions  deprive  no  other  man 
of  a  just  right,  is  a  measure  of  oppression,  and 
should  not,  therefore,  find  a  place  in  the  eco- 
nomic system  of  any,  much  less  of  a  free, 
people. 

Upward  of  two  hundred  years  ago  Sir 
Thomas  Gresham,  after  a  careful  study 
of  the  logic  of  the  question  and  of  the 
facts  presented  to  him  as  a  merchant  in 
money,  formulated  the  law  that  bears 
his  name.  No  man  of  to-day  who  gives 
serious  thought  to  the  subject  can  rea- 
son himself  into  the  belief  of  a  possibility  of 
Gresham's  proposition  not  being  correct. 
Upward  of  two  thousand  years  before 
Gresham  was  born  there  was  a  civilization  on 
earth  that  few  will  dispute  was  even  more  ad- 
vanced in  civilization — save  in  the  science  of 


156  FREE  BANKING. 

war  and  destruction — than  was  England  in 
Gresham's  time. 

Among  the  great  masters  of  thought  of  that 
day  was  one  of  whom  England  has  yet  failed 
to  produce  his  superior,  or  even  his  equal — 
the  great  Plato.  It  is  said  of  Plato,  that  after 
years  of  thoughtful  observation  of  the  use  of 
money  and  its  various  substitutes  in  Athens, 
he  formulated  a  law  that,  although  well-nigh 
forgotten,  may  be  of  even  more  importance  to 
the  economic  world  than  was  Gresham's  law. 
In  effect,  Plato's  law  declared  that  ''  the 
money  best  calculated  to  develop  the  material 
welfare  of  communities  was  a  money  that, 
in  such  communities,  could  readily  be  ex- 
changed at  its  face  value  for  the  best  money 
of  the  world,  but  of  so  little  value  intrinsically 
that  it  would  not  be  attracted  away  from  the 
community  in  which  it  was  issued."  It  was 
for  the  convenience  of  the  Athenians  that 
Plato  advocated  the  use  of  a  money  that  would 
possess  all  the  value  in  Athens  that  the  best 
money  could  possess,  but  could  not  be  made 
as  valuable  in  Athens  or  elsewhere  when 
melted  in  the  pot. 

There  are  many  substitutes  for  money. 
That  which  now  serves  best  as  a  substitute  is 
the  check,  and  as  a  means  of  effecting  changes 
of  credit  in  the  system  of  bookkeeping  to 
which  banks  of  deposit  have  perfected  it,  it  is 


FREE  BANKING.  157 

invaluable.  The  extent  to  which  it  may  be 
advantageously  used  is  possibly  scarcely  yet 
conjectured.  In  China,  where  the  population 
is  dense  and  transportation  is  slow,  it  is  almost 
the  only  means  of  paying  debts,  and  checks 
are  used  there  in  paying  the  very  smallest  ac- 
counts. Europe  is  much  indebted  to  Asia  for 
its  intellectual  development;  and,  doubtless, 
Europe  may  still  learn  from  Asia  much  more 
that  will  be  useful.  In  the  arts  and  science 
of  war  and  destruction  of  man's  creations,  the 
Europeans  are  masters.  But  are  they  in  the 
science  of  peace?  Money  of  gold  and  silver 
is  the  money  of  war.  Paper  money  and  bank 
checks  are  the  substitute  for  money,  which 
peace  promotes  and  war  destroys.  And 
why?  The  value  of  gold  and  silver  money 
rests  upon  the  value  of  the  metal  used.  Wars 
do  not  disturb  it.  The  value  of  paper  money 
rests  entirely  on  the  public's  confidence  in  the 
ability  of  its  makers  to  pay  on  demand  the 
amount  named  on  the  face  of  the  paper.  War 
impairs  that  confidence. 

Paper  issued  as  money  by  a  government 
that  guarantees  its  redemption  in  coin,  can- 
not be  classed  as  a  substitute  for  money,  but 
rather  as  money  itself.  Paper  issued  and 
serving  in  the  place  of  money  not  made  legal 
-tender  by  State  or  nation  is  a  substitute  for 
money.     Paper  used  as  money  that  may  be 


158  FREE  BANKING. 

issued  by  State  or  nation,  and  receivable 
for  taxes,  would  also  be  a  substitute  for 
money. 

There  can  be  no  doubt  that  paper  bills  that 
are  not  legal  tenders  may  successfully  and  ad- 
vantageously be  used  in  business,  which  no 
creditor  is  under  obligation  to  take.  But  no 
such  paper  will  be  accepted  by  a  creditor  who 
does  not  feel  confident  that  such  paper  will  be 
redeemed  by  its  maker  for  its  full  face-value 
on  demand.  There  can  be  no  doubt  that  so 
far  as  the  business  affairs  of  the  United  States 
are  concerned,  paper  money,  not  legal  tenders, 
has  frequently  been  most  advantageously 
used;  notably,  the  generous  use  of  Clearing 
House  certificates  in  1893.  There  is  no  rea- 
son for  believing  that  its  use  has  been  less  ad- 
vantageous to  the  other  commercial  nations 
of  the  world. 

In  small  communities  substitutes  for  money 
have  an  advantage  over  money  itself  that 
makes  them  an  invaluable  aid  in  the  building 
up  of  agrarian  interests.  Thus,  communities 
that  produce  large  supplies  of  those  com- 
modities that  society  needs,  should  not  be 
impoverished  by  such  great  production. 
Nothing  but  unnatural  causes  will  produce 
the  condition  ol  poverty  now  existing  in  such 
communities.  Under  the  present  monetary 
system  of  civilization   it  frequently  happens 


FREE  BANKING.  i59 

that  many  die  of  hung^er,  surrounded  by 
an  '*  overproduction "  of  food.  They  die 
also  for  the  want  of  clothing,  surrounded 
by  an  *'  overproduction  "  of  clothing.  They 
sicken  and  suffer,  too,  in  the  stifling  atmos- 
phere of  the  accursed  tenement-houses,  sur- 
rounded by  an  ''  overproduction  "  of  houses. 
In  the  agrarian  districts,  however,  few  suffer 
for  the  want  of  plenty  of  air.  They  do 
suffer,  though,  for  want  of  Wholesome  food 
and  want  of  comfortable  clothing.  And 
that,  too,  in  communities  where  they  have  per- 
formed their  full  share  of  labor  in  producing 
an  abundance  of  those  commodities  that  could 
usually  be  produced  advantageously  in  the 
community  in  which  they  live. 

No  man  will  attempt  to  justify  the  system 
that  causes  men  to  suffer  for  food  and  clothing 
who  have  faithfully  and  successfully  labored 
to  produce  those  commodities  they  had  every 
reason  to  suppose  would  command  for  them 
those  things  necessary  for  comfort. 

No  man  will  fail  to  condemn  a  system  that 
he  believes  will  be  instrumental  in  preventing 
men  from  enjoying  the  fruit  of  their  labor, 
unless  he  have  a  selfish  motive  for  such 
prevention. 

When  the  Government  of  the  United  States 
enforces  its  declaration  that  no  money,  or  sub- 
stitute for  money,  not  equal  in  value  to  the 


l6o  J^REE  BANKING. 

best  money  issued  by  the  Government,  which 
is  a  gold  dollar,  shall  be  used  in  the  States, 
it  then  places  an  impediment  in  the  way  of 
the  people  of  Illustrateville  to  enjoy  the  fruits 
of  their  labor. 


CHAPTER  IX. 

Illustrateville  is  a  town,  let  us  say, 
of  about  three  thousand  inhabitants,  sur- 
rounded by  fertile  farms.  It  was  settled 
upward  of  a  hundred  years  ago  by  a 
class  of  worthy,  frugal,  industrious  young 
farmers.  At  least,  those  settlers  possessed 
themselves  of  the  lands  comprised  within 
the  community  of  which  Illustrateville  is 
the  center.  The  town  itself  was  a  result 
of  this  settlement.  To-day  two  or  more 
competing  railroads  pass  through  it,  offer- 
ing to  its  citizens  as  favorable  opportuni- 
ties— such  as  cheap  passenger  and  freight 
rates — as  are  possessed  by  any  other  town  of 
its  size  in  the  country. 

The  growth  of  the  town  was  slow;  no  arti- 
ficial boom  developed  it  unnaturally.  A  half 
dozen  or  more  young  farmers  a  hundred  years 
ago^ — each  with  his  wife  and  small  family,  and 
a  family  outfit,  more  or  less  elaborate — had 
traveled  overland  from  the  place  of  their  birth 
until  they  had  reached  this  place.  Each  man 
had,  as  his  great  ambition,  the  desire  to  till 
his  own  farm,  to  rear  his  children  to  honesty 

i6i 


1 62  FREE  BANKING. 

of  purpose,  justly  to  perform  the  duties  of  life, 
to  be  respected  by  his  neig'hbors,  and  to  pro- 
vide a  comfortable  sustenance  for  his  family 
against  the  time  when  old  age  would  deprive 
him  of  physical  power  to  produce  further. 

The  land  was  fertile,  the  climate  agreeable, 
and  many  things  about  the  country  were  so 
pleasing  that  these  early  settlers  sent  to  those 
they  left  behind  such  information  about  the 
settlement  that  others  were  induced  to  come. 

Soon  the  need  of  a  school  was  felt;  a  con- 
venient spot  was  selected  by  a  committee  ap- 
pointed for  the  purpose;  and  everyone  united 
to  do  his  portion  toward  the  erecting  of  the 
schoolhouse.  It  stood  completed,  the  first 
house  built  in  Illustrateville.  One  of  the 
farmers,  whose  house  was  near  the  school,  de- 
cided that  the  demand  of  the  new  community 
required  a  store.  This  he  opened,  together, 
possibly,  with  a  public  house.  The  school- 
house  had  served  as  a  place  of  public  worship, 
but  the  demands  of  the  advanced  prosperity 
of  the  settlement  required  a  church  and  a 
resident  pastor.  The  agriculturists'  require- 
ments for  a  blacksmith  had  induced  a  smith 
to  set  up  his  forge  near  the  church,  and  in  a 
little  while  a  wheelwright  shop  was  connected 
with  the  blacksmith  shop,  and  a  resident 
wheelwright  was  added  to  the  community.  A 
post  office  had  already  been  established  by  the 


FREE  BANKING.  1 63 

Government,  and  a  stage-route  to  a  larger 
supply  town  became  a  necessity.  An  ener- 
getic and  restless  printer  had  entered  the  com- 
munity and  set  up  a  printing  office,  which  was 
but  the  prelude  to  a  newspaper.  A  resident 
physician  had  long  before  been  added  to  the 
community.  Following  the  issuing  of  a  news- 
paper came  also  the  lawyer. 

It  had,  as  may  be  surmised,  taken  a  decade 
or  more  before  the  town  had  reached  this 
state  of  development. 

Later,  then,  some  of  the  more  thrifty  or  more 
fortunate  of  the  farmers  had  concluded  that 
they  would  give  up  their  farm  to  a  son,  and 
move  into  the  town,  there  to  spend  their  re- 
maining years  in  retirement  from  active  labor. 
Each  of  this  class  built  for  himself  in  the  town 
a  more  or  less  pretentious  house;  and  so  the 
town  grew,  until,  after  many  years,  six  or 
seven  hundred  houses  had  been  erected  in 
Illustrateville.  In  many  of  these  houses, 
and,  in  fact,  in  most  of  them,  dwelt  young, 
active  persons,  children  or  dependents  of  the 
household,  who  longed  for  the  opportunity  to 
earn  a  livelihood.  Illustrateville  had  indeed 
many  charms  for  them,  and  the  mere  thought 
of  leaving  it  and  going  out  among  strangers 
was  generally  oppressive.  At  home  nearly 
everybody  knew  them.  It  was  known  that 
they  had  been  reared  in  eminently  respectable 


l64  FREE  BANKING. 

homes;  known,  too,  who  their  grandparents 
were,  as  well  as  their  parents.  Everybody, 
in  fact,  knew  the  eminent  respectability  of 
their  lineage.  Sufficiently  informed  by  edu- 
cation to  know  the  consideration  that  they 
received  in  Illustrateville  was  because  of  their 
respectable  lineage,  the  same  would  not, 
they  knew,  be  accorded  them  elsewhere,  and 
that  if  they  were  of  what  is  termed  ''  the 
humble  class  "  their  lines  of  life,  if  sustenance 
could  there  be  obtained,  would  run  smoother 
in  Illustrateville  than  elsewhere  on  earth. 

So  long  as  the  sole  industry  was  simply 
purveying  tO'  the  needs  of  the  agriculturists 
who  surrounded  the  town,  it  was  necessary 
for  a  majority  of  these  young  people  to  go 
away  to  the  larger  towns  and  to  the  cities. 
To  prevent  this  exodus  of  the  very  best 
material  for  commercial  developments  that 
the  town  possessed,  measures  were  sought  to 
establish  industries  in  the  town  for  the  pro- 
duction of  those  commodities  other  than  their 
own  community  would  consume.  Illustrate- 
ville and  its  vicinity  possessed  the  ma- 
terial, the  skill,  and  the  labor  essential  to  the 
manufacturing  of  several  important  and 
much-used  commodities,  which  could  readily 
be  sold  for  use  in  other  communities.  The 
town  had  the  reputation  of  being  a  rich  com- 
munity; and,  in  truth,  it  w^as  rich.     Nearly 


FREE  BANKING.  165 

every  man  lived  in  his  own  house,  around 
which  was  more  or  less  fertile  and  highly 
cultivated  land.  The  houses  were  well  sup- 
plied with  comfortable  furniture;  a  large  num- 
ber of  the  householders  were  owners  of  one 
or  more  horses,  and  nearly  all  had  a  sum  of 
money  saved  by — hidden  away  in  some  secure 
place.  Want  and  privation  were  truly  stran- 
gers in  Illustrateville;  although  not  one  of 
its  inhabitants  would  have  been  called  a  capi- 
talist by  those  w^ho  fully  understood  what  that 
term  implies. 

At  a  meeting  of  the  business  men  and  prop- 
erty-holders, called  to  discuss  plans  for  pro- 
moting new  industries  in  Illustrateville,  it 
became  apparent  that  the  wish  that  such 
manufacturing  industries  should  be  estab- 
lished as  would  keep  the  young  and  ener- 
getic men  and  women  at  home,  was  practically 
unanimous.  Discussion  of  the  question  of  the 
ways  and  means  of  accomplishing  that  object 
revealed  that  there  was  not  sufficient  cash 
capital  in  the  town  to  be  of  much  service 
toward  securing  the  object  sought  after;  yet 
there  was  an  abundance  of  wealth.  There 
were  very  few  mortgaged  houses  in  the  com- 
munity, but  those  few  served  to  measure  the 
available  worth  of  the  town.  It  was  found 
that  fifteen  or  twenty  of  the  community's  citi- 
zens could  readily  borrow,  on  the  security  of 


1 66  FREE  BANKING. 

their   farms   and   buildings,   upward   of   one 
hundred  thousand  dollars. 

Under  existing  conditions,  had  those  fifteen 
or  twenty  men  determined  to  establish  given 
industries  necessary  to  keep  the  young  energy 
of  the  town  at  home,  it  would  have  been 
necessary  for  them  to  organize  a  company. 
To  secure  the  cash  capital  necessary  for  its 
establishing,  they  would  have  had  to  go  to 
some  distant  and  more  general  business  cen- 
ter, and  there,  on  the  security  of  mortgages  on 
their  individual  holding,  borrow  the  necessary 
money.  The  men  who  would  organize  such 
a  business,  and  by  such  methods,  would  not 
be  old  men  of  conservative  habits,  who,  satis- 
fied with  their  accumulation,  were  perfectly 
willing  to  hve  in  a  simple  way  and  aid  younger 
men;  they  would,  on  the  contrary,  be  the 
speculative  men  of  the  community,  who  would 
intend  actively  to  manage  the  business  that 
they  organized.  Whether  they  organized 
that  business  from  the  purest  philanthropy  or 
from  the  basest  selfish  motives,  the  conditions 
confronting  them  would  be  the  same.  Under 
existing  conditions  they  could  not  have  bor- 
rowed the  money  except  at  a  time  when  there 
was  a  redundancy  of  money  in  the  great  busi- 
ness centers;  for,  under  no  other  conditions 
of  the  money  market  could  such  loans  be 
effected  on  country  property. 


FREE  BANKING.  167 

It  may  be  well  to  examine  what  has  been 
the  result  in  the  United  States  during  the  last 
thirty-five  years,  of  nearly  all  manufacturing 
industries,  that  have  been  established  by  the 
efforts  of  the  more  prosperous  and  enterpris- 
ing members  of  communities  such  as  Illus- 
trateville,   to  promote   home   industries.     In 
times  of  sluggish  business  conditions  through- 
out the  country  but  few  such  industries  were 
ever  established;  in  times  of  panics  and  busi- 
ness depression,  none  it  is  safe  to  say  has  ever 
been    organized.      Only    at    such    times    as 
business  activity  and  prosperity  caused  in  the 
great  centers  the  accumulation  of  more  money 
than  the  capitalist  could  lend  in  those  centers 
to  those  they  believed  it  safe  to  trust,  could 
the  enterprising  men  of  the  country  borrow 
money  on  the  security  of  their  farms  and  their 
town   property.     When    the    active    business 
men  of  those  large  communities  made  such 
sales  of  the  commodities  in  which  they  dealt, 
and    the    purchasers    of    such    commodities 
quickly  paid  for  them,  the  banks  were  fre- 
quently unable  to  lend  the  money  of  their 
depositors;  it  remained  idle  in  the  vaults.     At 
such    times    the    managers    of    these    banks 
turned  their  search  for  users  of  their  money  to 
centers  other  than  their  own.     All  the  great 
commercial  and  financial  centers  were  alike 
affected  with  a  redundancy  of  money.     Hence 


1 68  FREE  BANKING, 

it  was  the  weaker  centers  toward  which 
those  bank  managers  then  looked  for  users  of 
their  money.  To  follow  step  by  step  the  proc- 
ess by  which  their  financial  eyes  rested  upon 
Illustrateville  is  not  necessary.  We  will, 
however,  turn  to  the  method  by  which  they 
reached  a  like  community.  Some  fifteen  or 
twenty  miles  away  from  such  a  community — 
in  a  country  town,  perhaps — were  long  estab- 
lished and  thoroughly  responsible  banks.  To 
the  managers  of  those  banks  word  was  can- 
veyed,  by  methods  known  to  the  money-lend- 
ers, that  they  could  go  to  the  great  cities  and 
borrow  such  sums  of  money,  limited  only  by 
their  credit,  at  very  low  rates  of  interest;  this 
money  they  could  have  the  use  of  for  an  in- 
definite time,  subject,  however,  to  a  call-notice 
that  must  be  given  sixty  or  ninety  days  pre- 
viously to  the  time  when  payment  might 
be  demanded.  Flattering  inducements  were 
made  frequently  to  the  country  banker:  it 
would  be  many  months,  perhaps  years,  be- 
fore the  loan  would  be  called  in.  Why?  The 
city-bank  managers  bad  faith  in  the  financial 
integrity  of  the  country  banker,  and  so 
felt  perfectly  safe  in  making  such  loans.  In 
many  cases  banks  borrowed  money  for  less 
than  two  per  cent.  It  was  in  such  financial  and 
business  conditions  of  the  country  that  many 
country  banks  aided  in  the  organization  of 


FREE  BANKING.  169 

home  industries.  They  lent  on  bonds  and  on 
mortgages  on  real  estate  the  amount  required 
to  equip  the  plants  and  to  purchase  raw  ma- 
terial for  beginning  operations,  charging  the 
legal  interest — from  two  to  six  per  cent,  profit 
— for  such  loans  as  they  had  made  of  the 
money  they  had  borrowed.  Imagination  may 
be  left  free  to  conjecture  the  oiliness  of  the 
country  bankers'  tongues  when  they  aided  in 
the  promotion  of  enterprises  in  which  they  saw 
an  opportunity  for  their  banks  to  make  a 
profit  of  three  or  four  per  cent,  on  the  capital 
of  the  enterprise;  promoted,  too,  without  in- 
curring a  probable  financial  risk. 

When  the  money  of  the  business  men  of  the 
great  centers — deposited  and  not  used  in  the 
great  banks  of  the  city,  and  not  needed  by 
them — had  found  its  way  through  the  coun- 
try banks  into  the  hands  of  the  owners  of 
country  property,  manufacturing  industries 
were  begun,  and  the  towns  in  which  such  in- 
dustries were  started  became  apparently  pros- 
perous. These  industries  gave  not  only  em- 
ployment to  the  labor  and  the  skill  available 
in  the  community  in  which  the  town  was  situ- 
ated, but  they  also  drew  citizens  from  other 
communities.  As  rapidly  as  finished  the 
manufactured  goods  were  sold  readily  and 
profitably,  and  the  demand  for  more  goods 
than  the  capacity  of  the  plants  could  produce 


lyo  FREE  BANKING. 

frequently  led  to  the  enlargement  of  the  fac- 
tories.    More  money  then  was  borrowed. 

Why  not?  Satisfactory  profits  had  been 
made;  the  town  had  been  improved;  all  its 
people  had  become  active  workers  at  profit- 
able occupations;  why  should  not  the  mana- 
gers of  the  industry  borrow  more  money, 
enlarge  their  opportunity  for  profit  and  for  the 
development  of  the  town?  That  was  the  way 
business  was  done  in  the  great  cities;  that 
was  the  only  way  that  men  in  manufacturing 
avocations  had  ever  lifted  themselves  from 
lowly   conditions   to   great  wealth. 

Generally,  about  the  time  that  the  additions 
toi  the  plant  had  all  been  finished,  the  man- 
ager  of  it  discovered  he  had  greater  difficulty 
in  effecting  sales;  it  was  quite  possible,  in  fact, 
for  the  old  plant  to  have  produced  all  of  the 
commodities  that  they  could  sell  at  a  profit. 
Collections  became  more  difficult,  and  those 
whom  they  owed  were  more  anxious  to  make 
collections.  For  a  new  tariff  bill  had  been 
projected  by  men  of  influence  in  the  land;  or 
some  hot-headed  naval  or  commercial  officer 
in  foreign  lands  had  been  subjected  to  some 
indignity,  to  avenge  which  the  *'  honor  of  the 
nation  "  demanded  that  war  should  be  de- 
clared. Or  some  great  political  organization 
had  determined  that  the  best  policy  for  the 
Government  to  pursue  in  regard  to  its  mone- 


FREE  BANKmC.  17 1 

tary  system  was  something  radically  different 
from  the  existing  system;  or  one  of  a  multi- 
tude of  other  causes  had  affected  public  con- 
fidence in  business  men's  ability  to  fulfill  their 
contracts. 

That  lack  of  confidence  would  be  indicated 
first  in  the  great  centers.  The  most  cowardly 
thing  of  all  things  cowardly  is  money;  and 
the  larger  the  amount  of  rroney,  the  bigger 
the  coward.  The  great  banks  of  the  city 
would  very  early  in  the  disturbance  call  in 
their  loans  to  the  country  banks.  And  the 
country  banks  would  have  no  option  in  the 
matter.  Not  only  would  they  be  compelled 
to  refuse  to  the  country  factory  further  aid,  in 
the  shape  of  new  loans  and  discounts,  but  the 
country  bank  would  be  compelled  to  demand 
the  payment  of  most  of  the  mortgages  given 
by  the  individual  stockholders  of  the  factory 
on  their  private  holding.  Before  anyone  but 
the  skillful  financial  operator  of  the  great  cities 
had  learned  that  a  depressed  condition  of  busi- 
ness might  be  expected,  the  manufacturing 
enterprises  of  the  town  in  illustration  would 
be  financially  ruined.  By  the  ease  with  which 
they  borrowed  money  they  had  been 
*'  charmed "  into  an  unnatural  development 
of  industries  in  their  town;  ''charmed"  into 
additional  improvement  by  the  apparently 
satisfactory  profits  on  the  earliest  efforts ;  they 


172  FREE  BANKING. 

had  stretched  their  credits  to  the  uttermost, 
and  when  the  frost  of  business  depression  fell, 
they  were  powerless.  The  commodities  they 
had  manufactured  in  excess  of  orders — and 
under  the  conditions  it  was  quite  natural  that 
the  supply  should  be  large — were  forced  upon 
the  market  at  ruinous  prices,  to  meet  pressing 
demands  for  money.  The  works  were  closed, 
because  goods  could  not  be  sold  at  even  the 
cost  of  production;  the  vast  plant  became  of 
no  value  unless  the  business  could  be  con- 
tinued; not  ten  per  cent,  of  its  cost  could  be 
realized  under  a  forced  sale.  Although  the 
factory  became  idle,  the  interest-account 
never  ceased  to  grow,  except  when  payments 
on  it  were  made.  The  people  who  had  been 
attracted  to  the  town  when  the  business  of  the 
factory  was  active  could  not  pay  rents,  and 
houses  became  unoccupied  and  dilapidated 
rapidly.  People  who  had  become  educated 
to  active  work  and  good  v/ages  became 
idlers  and  grumblers;  the  merchants  of  the 
town,  one  by  one,  were  compelled  to  give 
up  business  or  make  terms  with  their  cred- 
itors. 

In  communities  where  such  disaster  pre- 
vailed real  estate  would  naturally  depreciate. 
Measured,  too,  by  the  ability  of  its  owners  to 
borrow  money  on  it,  the  depreciation  would 
be  to  a  point  below  that  which  existed  at  the 


FREE  BANKING.  I73 

time  the  promoting  of  manufacturing  indus- 
tries there  was  first  discussed. 

This  is  not  a  fanciful  illustration;  it  is  real. 
And  it  is  within  the  bounds  of  truth  to  say  that 
upward  of  a  thousand  of  such  communities 
exist  to-day  in  the  United  States.  And  too 
frequently  the  blighted  hopes  of  the  business 
men  who  promoted  those  industries,  united 
with  the  great  disappointment  of  the  wage- 
earners  of  the  community,  have  resulted  in  a 
perceptible  lowering  of  the  moral  condition 
of  those  communities. 


CHAPTER  X. 

We  will  now  return  to  Illustrateville,  during 
the  prevalence  of  a  monetary  system  predi- 
cated on  justice;  a  system  that  gives  oppor- 
tunity to  all  and  is  unjust  1o  none,  whether  the 
measure  of  value  be  of  gold  or  of  silver.  This 
the  Government  regulates  as  it  regulates  the 
yardstick.  Upon  the  latter  the  Government 
stamps  its  guarantee  of  the  accuracy  of  the 
measure,  and  charges  those  who  may  need  it 
the  cost  of  the  stamping.  But,  as  the  cost  of 
coining  gold  is  an  infinitesimal  part  of  the 
value  of  the  metal  used,  there  may  perhaps  be 
no  objection  to  Governmental  free  coinage. 

For  the  convenience  of  interstate  travel- 
ers, and  men  of  other  businesses  who  might 
demand  money  that  could  be  used  throughout 
the  country,  the  United  States  might  issue 
paper  bills  about  equal  in  volume  to  the  issue 
of  the  silver  notes  now  in  circulation;  bills 
that  would  be  received  by  the  Government  for 
taxes  and  custom  duty,  but  not  necessarily  to 
be  legal  tender  for  any  other  purpose.  And 
it  would  be  more  desirable  if  the  issue  of  such 
paper-substitute  for  money  be  limited  to  at 
174 


FREE  BANKING.  I75 

least  one-half  of  the  annual  expenses  of  the 
general  Government. 

Such  bills  of  the  Government — because  of 
their  convenience  for  so  many  purposes 
where  gold  coins  would  be  inconvenient — 
would,  anywhere  in  the  United  States  and 
at  all  times,  be  equal  in  value  to  the  standard 
money.  It  is  assumed  that  the  standard  will 
be  the  present  gold  dollar.  Of  such  limited 
paper  money  not  enough  could  be  had 
by  taxpayers  with  which  to  pay  all  taxes 
and  customs,  and  the  amount  of  such  sub- 
stitutes for  money  furnished  by  the  Gov- 
ernment should  always  be  so  limited  that 
not  enough  of  it  could  be  had  at  any  time  to 
meet  the  requirement  of  the  taxpayers.  This 
would  require  that  taxpayers  pay  some  part 
of  their  taxes  in  gold  dollars.  It  would 
be  a  faulty  monetary  system  should  the  Gov- 
ernment require  that  a  part  of  the  taxes  be 
paid  in  gold.  When  offered  by  the  taxpayer, 
the  Government  should  accept  its  tax  notes  in 
full  payment;  but  if  the  issue  of  these  notes 
were  limited  to  one-half  the  annual  budget, 
there  would  be  a  constant  flow  of  gold  into  the 
Treasury,  and,  in  all  probability,  a  percentage 
of  taxes  would  be  paid  in  that  metal  far  greater 
than  by  the  use  of  tax  notes.  These  not 
being  legal  tenders,  could  be  put  into  circu- 
lation only  by  the  Government  using  them — 


176  FREE  BANKING. 

to  purchase  commodities  and  pay  for  services 
rendered  to  the  Government.  To  the  Gov- 
ernment might  safely  be  given  the  option  of 
paying  its  debts  with  these  tax  notes,  except- 
ing those  already  contracted  for,  and  for  which 
gold  payment  was  pledged.  For  govern- 
ments should  always  redeem  their  pledges. 
There  would  be  no  trouble,  however,  to  get 
the  notes  into  circulation.  They  would  readily 
be  accepted  in  this  country  by  all  to  whom 
they  were  offered ;  and  it  is  quite  possible  that, 
at  times,  they  might  command  a  premium  of 
a  fraction  f  one  per  cent.  For,  so  long  as  the 
Government  lasts  and  receives  them  for  taxes 
they  would  never  be  discounted.  This  truth 
is  so  axiomatic  that  any  argument  to  prove  it 
would  be  ridiculous.  The  tax  note  would 
never  menace  the  credit  of  the  nation.  The 
Government  would  be  under  no  obligation  to 
redeem  any  of  its  circulating  tax  notes,  ex- 
cept as  they  flowed  into  the  Treasury  through 
the  channels  of  taxation.  Its  credit,  there- 
fore, would  not  be  disturbed  by  any  effort  of 
the  owners  of  gold  coins  and  of  bullion  to  dis- 
turb the  value  of  that  metal.  These  owners 
could  appreciate  or  depreciate  the  metal  used 
for  standard  coin  without  any  disturbance  to 
the  Government's  finances,  although  any  dis- 
turbance of  the  value  of  the  metal  of  the 
standard  would  affect  the  business  operations 


FREE  BANKING.  1 77 

of  the  country  more  or  less  seriously.  But  all 
would  be  affected  alike — from  the  Atlantic  to 
the  Pacific,  from  the  Gulf  to  the  Great  Lakes. 

When  the  measure  of  value  was  the  present 
gold  dollar,  Illustrateville  organized  to  pro- 
mote home  industries.  The  Government's 
only  paper  issues  were  tax  notes,  redeemable 
by  the  Government  only  for  taxes  and  cus- 
toms dues,  and  not  legal  tenders  for  any  other 
obligations  of  the  people;  when  no  obstruc- 
tions in  the  way  of  private  or  of  State  banks 
were  imposed  by  the  United  States;  when  the 
Government  of  nation  or  State  did  not  guar- 
antee the  redemption  of  paper  money,  and  to 
make  a  bank  bill  sound  used  no  methods 
besides  those  used  to  secure  the  payment  of 
any  other  kind  of  an  I.  O.  U. 

In  fact,  any  other  kind  of  Government 
paper  money  that  would  serve  the  purpose  of 
currency  that  tax  notes  accomplish,  would  not 
interfere  with  the  operations  of  banks  like  the 
one  under  illustration. 

The  necessity  to  provi  le  useful  and  profit- 
able occupations  for  tl  e  young  men  and 
women  of  Illustrateville  (for  upward  of  four 
hundred  of  them  in  the  community  were  so 
anxious  to  do  something  for  themselves  that 
they  were  preparing  to  go  away  to  larger 
business  centers,  or  to  the  great  cities)  had 
been  long  discussed  by  lawyers,  doctors,  min- 


178  FREE  BANKING, 

isters,  merchants,  mechanics,  and  farmers  of 
the  community.  Those  discussions  were 
keenly  Hstened  to  by  the  young  people  who 
loved  so  well  the  place  of  their  birth.  But 
they  felt  impelled  by  necessity  to  leave  it  for 
opportunities  to  earn  a  sustenance;  and  so  it 
was  with  the  keenest  delight  that  they  hailed 
the  crystallization  of  that  long  discussion — a 
real  effort  to  establish  a  factory  in  lUustrate- 
ville. 

Of  the  community  of  which  lUustrateville 
w^as  the  center  the  more  enterprising  citizens, 
who  possessed  valuable  real  estate  and  im- 
provements thereon,  met  in  the  town  hall, 
or,  perhaps,  in  the  schoolhouse,  to  discuss 
plans. 

Soon  it  was  ascertained  that  there  were  not 
sufficient  gold  dollars  or  tax  notes  in  the  pos- 
session of  the  community  to  accomplish  any- 
thing of  a  practical  nature.  It  was  suggested 
that  some  of  the  real-estate  holders  borrow 
money  on  their  real  estate,  and  lend  it  to  the 
proposed  company,  on  the  security,  perhaps, 
of  the  stock  of  the  company.  The  objection 
to  this  plan  was  soon  apparent.  No  property- 
owner  would  incur  the  risk  of  borrowing 
money  to  lend  to  a  prospective  company,  un- 
less he  could,  to  a  great  extent,  control  the 
company.  And  none  among  those  best  able 
to   raise   money   by   mortgaging   their   real 


FREE  BANKING.  179 

estate,  cared  to  impose  upon  themselves  the 
burden  of  a  business  of  which  they  knew  prac- 
tically but  little. 

It  was  determined  finally  to  organize  a 
bank.  It  was  not  necessary  to  have  any  gold 
or  tax  notes.  The  possession  of  a  few  thou- 
sand dollars'  worth  would  be  an  advantage, 
but  not  a  real  necessity.  It  was,  however, 
necessary  to  have  honest  and  capable  man- 
agers of  that  bank;  men  well  known  to  the 
community  of  Illustrateville  for  their  keen 
business  perspicuity,  sterling  integrity,  and 
sobriety. 

To  avoid  difficulties,  annoyances,  and  dis- 
turbance of  business  it  was  determined  that  it 
would  be  better  to  organize  the  bank  as  a  cor- 
poration rather  than  as  a  firm.  These  annoy- 
ances and  difficulties  would  necessarily  occur 
whenever  death  claimed  one  of  the  members 
of  the  firm,  and  that  would  be  likely  to  occur 
frequently,  as  there  would  necessarily  be  a 
large  number  of  members  of  the  banking 
company,  and  they  would  almost  all  be  men 
who  had  practically  fought  the  battles  of  life 
and  were  retired  veterans. 

The  charter  of  the  Bank  of  Illustrateville 
was  secured.  A  vigorous  man  of  the  town 
was  made  president.  Years  of  careful  atten- 
tion to  his  business — that  of  a  country  mer- 
chant, perhaps — and  a  life   of  sobriety,   in- 


i8o  FREE  BANKING. 

dtistry,  and  integrity,  had  won  for  him  success 
and  the  confidence  of  the  pubhc  generally. 

He  WIS  selected  by  a  board  of  directors,  all 
men  well  known  in  the  community,  and  gen- 
erally respected  for  their  many  good  qualities. 
A  cashier  was  then  appointed,  a  young  man  of 
honesty  and  sobriety,  whose  father  and  grand- 
father had  been  well  acquainted  with  most  of 
the  older  men  of  the  community,  and  were 
known  to  be  honest  and  worthy.  All  the  em- 
ployees of  the  bank  were  well  known,  at  least 
to  the  business  people  of  Illustrateville;  conse- 
quently, when  the  bank  opened  its  doors,  the 
character  of  its  officers  had  inspired  the  pub- 
lic with  the  belief  that  so  long  as  the  bank  re- 
mained under  the  same  management,  nothing 
would  be  done  to  impair  its  credit.  Those 
citizens  who  aided  in  the  organization  of  that 
bank  did  not  care  a  rap  about  establishing  a 
credit  for  the  bank  elsewhere  than  in  the  com- 
munity, for  whose  convenience,  and  for  the 
promoting  of  new  industries  of  which,  it  had 
been  organized.  Those  of  the  management 
who  were  anxious  for  profits  could  not  have 
been  induced  to  resort  to  unnatural  means  to 
establish  a  credit  elsewhere,  as  there  would 
be  no  possibility  of  making  profits  from  pro- 
moting such  credits  sufficient  to  compensate 
for  any  expense  of  artificially  doing  so.  For, 
having  no  money  to  lend,  nor  seeking  to  bor- 


FREE  BANKING.  i8l 

row,  there  would  be  no  way  by  which  profits 
for  the  bank  could  be  realized  from  distant 
centers.  The  great  object  of  the  bank  was  to 
promote  home  industries,  not  to  make  profits 
by  lending  money,  although  profits  could  rea- 
sonably be  expected  by  the  bank's  manage- 
ment as  the  result  of  the  promotion  of  those 
industries. 

The  plans  for  promoting  those  industries 
were  very  simple.  Within  the  community  of 
Illustrateville  raw  material — for  the  purpose 
of  manufacturing  the  articles  that  were  pro- 
posed should  be  manufactured  at  home — 
could,  it  was  known,  be  readily  obtained.  The 
skill  and  labor  were  there,  largely  in  idleness, 
and  all  that  was  necessary  to  make  the  finished 
article  was  to  provide  the  ways  and  means  by 
which  skill  and  labor  could  so  manipulate  the 
raw  material  as  to  produce  the  finished  prod- 
uct. It  would  not  be  necessary  that  all  the 
raw  material  should  be  accessible  within  the 
limits  of  the  community,  because  the  bank's 
credit  was  sufficient  to  bring  it  from  other  sec- 
tions, and  the  finished  product  of  the  factory 
could  readily  be  exchanged  for  gold  money. 

The  bank  was  organized  by  issuing  stock 
to  those  possessors  of  real  estate  in  the  com- 
munity who  wished  to  become  stockholders. 
The  stockholders  paid  for  their  shares  of  stock 
by  giving  to  the  bank  mortgages — always  the 


I02  FREE  BANKING. 

first — on  their  real-estate  holding.  Stock 
would  not  be  issued  on  real  estate  for  more 
than  one-third  or  less  of  its  market  value. 
Such  mortgages  did  not  bear  interest,  and 
could  at  any  time  be  liquidated  by  the  holder 
of  such  mortgages  paying  to  the  bank  in  gold 
or  tax  notes,  or  notes  of  the  bank,  the  amount 
of  the  mortgage,  or  by  surrendering  the  stock. 

But  the  bank  agreed  that  money  so  paid 
should  be  re-lent,  as  expeditiously  as  safety 
would  permit,  to  some  real-estate  owner  who 
would  accept  the  stock  of  the  bank  in  ex- 
change for  the  mortgage.  It  would  be  very 
rare  when  there  would  be  any  such  transfers  of 
mortgages,  for  the  selling  value  of  such  mort- 
gaged places  would  be  more  likely  to  advance 
in  price  than  be  affected  otherwise.  The 
stock  issued  against  the  mortgaged  property 
would  naturally  be  transferred  to  any  pur- 
chaser of  such  mortgaged  property,  and,  being 
profit-making  stock,  it  would  generally  add 
additional  value  to  the  mortgaged  land. 
Various  other  valuable  plans  for  organization 
of  the  Bank  of  Illustrateville  might  have  been 
accepted  by  its  originators,  inasmuch  as  at 
the  time  the  bank  was  organized  there  were 
no  laws  standing  as  impediments  in  the  way 
of  banks  whose  capital  was  gold  or  any  other 
commodity  established. 

But,    there    was    very    little    cash    capital 


FREE  BANKING.  183 

available  in  the  community,  and  as  the  com- 
modity of  gold  served  no  better  purposes  in 
promoting  financial  credit  than  improved 
real  estate,  these  holders  of  real  estate,  and  not 
of  gold,  chose  real  estate  to  be  the  basis  of 
their  financial  credit.  When  the  bank  was 
finally  established,  these  holders  held  mort- 
gages to  the  amount  of  one  hundred  thousand 
dollars  against  from  three  to  four  hundred 
thousand  dollars'  worth  of  real  estate,  all  of 
which  was  improved  and  occupied. 

Probably  the  stock  was  distributed  among 
fifty  holders.  None  held  very  large  amounts. 
Those  who  aided  in  the  bank's  organization 
were  men  past  middle  age;  they  had  grown  up 
in  the  community  and  knew  every  stockholder 
in  the  bank;  knew  every  foot  of  land  against 
which  these  mortgages  rested  Not  one  could 
neglect  his  holding  or,  by  inattention  or  any 
other  cause,  permit  it  tO'  depreciate  without 
all  the  other  stockholders  being  made  ac- 
quainted with  the  facts.  All  were  keenly  alive 
to  the  importance;  all  were  interested;  each 
should  maintain  the  value  of  the  real  estate 
against  which  the  bank  held  mortgages. 
Under  such  system  the  bank  possessed  the 
power  to  call  in  the  mortgages,  and  to  demand 
payment  in  stock — the  stock  issued  in  ex- 
change for  the  mortgages — therefore,  a  depre- 
ciation of  the  securities  constituting  the  bank's 


1 84  FREE  BANKING. 

capital  was  impossible.  Should  the  bank  be 
overtaken  by  disaster,  its  stock  would,  to  the 
extent  of  its  full  face-value,  be  made  available 
to  pay  its  liabilities.  But  disaster  was  almost 
impossible,  as  will  be  shown  later. 

The  bank  was  successfully  organized. 
Had  there  been  any  necessity  for  the  use  of 
money,  the  credit  and  the  character  of  the 
men  who  managed  it,  aided  by  the  valuable 
mortgages  they  held,  would  have  secured  a 
loan  of  the  necessary  amount.  But  in  the 
case  of  the  industry  proposed,  when  almost 
the  entire  cost  was  for  labor  and  rav^^  material, 
which  the  community  possessed,  money  was 
not  necessary,  but  for  the  convenience  of  all 
the  people  of  the  community  of  which  lUus- 
trateville  was  the  center,  the  bank  issued  a 
substitute  for  money  that  was  nothing  more  or 
less  than  a  bank  bill  that  none  were  compelled 
to  take  as  payment  for  commodities  sold  or 
services  rendered,  but  which  all  dwelling  in 
the  community,  for  whose  convenience  it  was 
issued,  would,  nevertheless,  readily  accept. 
On  its  face  it  read,  "  The  bank  of  Illustrate- 
ville  will  pay  to  bearer,  on  demand,  the  sum  of 
one  dollar."  Everyone  there  felt  confident 
that  when  a  demand  was  made  on  the  bank 
for  that  dollar  it  would  be  satisfied,  and  that, 
every  dollar  called  for  on  the  face  of  the  note 
would  be  paid  in  gold  dollars  or  tax  notes.     A 


FREE  BANKING.  185 

demand  for  the  dollar,  under  such  circum- 
stances, would  seldom  be  made;  only  when 
people  wanted  to  go  away  from  Illustrateville 
would  they  demand  gold,  or  request  tax  notes, 
in  exchange  for  their  bank  bills. 

Four  or  five  active,  intelligent,  industrious, 
sober,  and  honest  young  men — no  other  kind 
would  receive  any  attention  from  the  bank 
officers — proposed  to  erect  in  Illustrateville  a 
factory,  in  which  to  manufacture  fruit  baskets 
and  plaque  ware.  This  will  prove  as  good 
an  industry  for  illustration  as  anything 
else.  Other  men  would  organize  for  the 
manufacture  of  other  commodities.  The 
young  men  were  known  to  the  managers  of 
the  bank.  It  would  be  useless  for  any  whose 
character  could  not  have  stood  the  most  rigid 
investigation  to  have  applied  to  the  bank  for 
financial  aid.  The  success  of  the  bank  de- 
pended upon  the  character  of  the  men  finan- 
cially aided  by  it,  as  well  as  upon  any  other 
kind  of  securities.  Hence,  sobriety,  industry, 
intelligence,  and  integrity,  when  united  in  one 
individual,  became  capital  worth  more  to  that 
bank  than  any  other  kind  of  capital,  because 
it  possessed  brains  and  energy.  Such  men 
could,  with  advantage  to  themselves,  to  the 
bank,  and  to  the  community,  use  those  bank 
notes  or  certificates  of  credit  that  the  bank 
must  lend  to  realize  profits. 


1 86  FREE  BANKING. 

For  the  erecting  of  the  factory  building  but 
little  money  was  needed.  The  bank  notes 
would  be  received  by  the  owners  and  the  cut- 
ters of  the  timber  and  lumber  used  in  the  con- 
struction of  the  factory.  All  artisans  and 
laborers  engaged  upon  it  accepted  payment 
in  the  bank's  notes;  the  merchants  of  the  com- 
munity readily  accepted  them  in  payment  for 
those  commodities  that  they  sold.  Money 
necessary  for  the  purchase  of  the  machinery 
could  be  furnished  by  the  bank  in  notes  given 
as  security  and  secured  by  the  indorsement  of 
such  men  of  property  as  might  be  interested 
in  the  success  of  the  enterprise,  and  were 
acceptable  to  the  managers  of  the  bank. 

As  soon  as  the  factory  had  been  put  into 
operation,  the  sale  of  its  products  would 
necessarily  return  to  the  town  as  much  or 
more  money  than  would  be  needed,  so  long  as 
the  bank's  notes  were  freely  accepted.  The 
treesi,  from  which  the  slats  and  veneering  were 
procured,  had  been  paid  for  with  notes  of 
the  bank.  The  labor  of  cutting  the  trees  from 
the  stump  had  been  paid  for  in  those  notes. 
The  labor  of  manufacturing  had  been  paid  for 
by  bank  notes;  also  the  labor  of  boxing  and 
loading  into  cars,  together  with  the  skill  that 
directed  the  work.  All  had  been  paid  for  with 
these  notes.  Only  the  nails  and  metal  needed 
in  the  manufacturing  had  required  any  kind 


FREE  BANKING,  187 

of  money  other  than  money's  substitute  in  the 
character  of  those  bank  notes.  The  railroad 
company  might  or  might  not  demand  gold  or 
tax  notes  in  payment  of  freight;  but  of  that 
invoice,  amounting  to  one  thousand  dollars  in 
value,  the  goods  of  which  had  been  shipped 
to  a  great  center  and  sold  by  the  managers 
of  that  factory,  all  the  expenses  incurred  in 
producing  them  and  in  placing  them  on  the 
market  in  which  they  were  to  be  consumed 
were — excepting  perhaps  fifty  or  seventy-five 
dollars  at  the  utmost — liquidated  by  the  use  of 
those  notes  that  had  been  issued  by  the  Bank 
of  Illustrateville,  and  readily  received  by  the 
people  of  that  community  as  of  equal  value 
with  the  gold  money  of  the  Government. 
They  were  accepted  wherever  received,  be- 
cause they  would  purchase  as  much  commodi- 
ties or  labor  as  money  of  gold  would  procure. 
Here  we  have  an  illustration  of  a  com- 
munity that  possesses  all  materials — the  prod- 
ucts of  nature  and  idle  men  and  women — as 
possibilities  for  the  production  of  wealth.  As 
long  as  the  labor  remained  idle  there  could  be 
no  production  of  wealth,  and,  of  course,  little 
or  no  progress.  The  community  could  not 
command  gold  or  money  to  set  energy  in  mo- 
tion to  produce  wealth.  Had  money  been 
advanced  by  capitalists  from  other  centers, 
it  is  true  wealth  would  have  been  produced; 


l88  FREE  BANKING. 

but  at  what  cost  to  that  community?  The 
labor  employed  by  those  capitaHsts  would 
have  been  wage-earning,  and  to  the  extent 
that  wage-earning  benefits  communities 
Illustrateville  would  have  been  improved. 
Labor's  share  of  gross  earnings  is  rarely  more 
than  twenty-five  per  cent,  of  the  wealth  it 
creates  in  factories.  All  profits  from  such  fac- 
tories, which  outside  capital  would  have 
operated  in  Illustrateville,  would  have  gone 
away  from  the  town  most  probably,  and  no 
improvement  to  the  community  would  result 
from  the  profits  realized  by  such  manu- 
facturing. The  products  of  nature — a  part, 
and  frequently  an  important  part,  of  the  wealth 
of  a  community — would  also  have  been  taken 
from  it;  and  to  that  extent,  at  least,  the  com- 
munity would  have  been  impoverished. 

Being  in  possession  of  the  right  to  organ- 
ize a  bank,  and  by  organizing  one  for  the  loan 
of  its  credit,  in  shape  of  currency-demand 
notes,  the  people  were  enabled  to  convert 
products  of  nature,  practically  useless  to  them 
in  the  shape  that  nature  finished  them,  into 
valuable  commodities,  by  employing  idle 
labor  that,  when  idle,  was  a  disadvantage  to 
the  community.  By  combining  nature's 
products,  by  the  employment  of  an  impover- 
ishing population, — idle  people, — they  practi- 
cally increased  the  wealth  of  the  community 


FREE  BANKING.  189 

to  the  full  extent  of  the  value  of  the  com- 
modities created,  less  the  expenses  of  market- 
ing them.  This  would  be  true  absolutely  in 
the  case  in  illustration  if  the  laborers,  when 
employed,  consumed  no  more  commodities 
than  when  idle,  and  when  no  one  hitherto 
employed  was  engaged  in  producing  those 
commodities,  but  had  been  living  upon  the 
product  of  the  labor  of  others  of  that  com- 
munity. 

Illustrateville  manfactured  not  only  baskets 
and  plaque  ware;  various  other  industries 
were  promoted  by  the  bank;  fully  enough  to 
keep  at  home  all  who  wished  to  remain  in 
the  place  of  their  birth  and  be  profitably  em- 
ployed. It  had  a  foundry  there  that  utilized 
the  old  iron  mechanism  that  had  been  dis- 
carded and  was  practically  useless.  The  new 
pig  iron  necessary  for  the  new  business  would 
probably  have  to  be  bought  with  money  other 
than  the  bills  of  the  bank.  All  other  cost  of 
the  finished  product  of  the  factory  could  un- 
questionably have  been  bought  by  the  bank's 
notes.  The  products  of  its  brickyards  were 
created  solely  by  the  bank's  credit  currency. 
In  extent  and  in  embellishments  Illustrate- 
ville grew  rapidly.  The  factories  created 
practically  from  nothing — unused  natural 
products  and  hitherto  idle  labor — perhaps 
as  much  as  four  dollars'  worth  of  commodities 


19°  FREE  BANKING. 

per  day  for  each  person  employed,  or  nearly, 
or  quite,  two  thousand  dollars  daily  of  really 
substantial  wealth,  one-fourth  of  which,  under 
ordinary  circumstances,  would  be  accumu- 
lated in  the  shape  of  new  or  improved  posses- 
sions of  the  people  of  the  community  that 
created  the  wealth.  The  interest  paid  to  the 
managers  of  the  bank,  the  profits  realized  by 
the  managers  of  the  factories,  together  with 
the  wages  and  salaries  paid,  all  would  be  re- 
tained in  Illustrateville,  a  town  of  three  thou- 
sand people,  the  center  of  a  community  of 
perhaps  not  over  ten  thousand.  Thus,  from 
their  manufacturing  industries  alone,  they 
would  realize  a  profit  of  six  or  seven  hundred 
thousand  dollars  per  year  above  what  they 
could  possibly  have  accumulated  had  not 
such  a  bank  as  described  promoted  and  devel- 
oped those  factories. 

Nor  would  that  measure  the  extent  of  the 
benefit  to  the  community  from  such  a  source ; 
because  the  seven  thousand  people  living 
around  about  Illustrateville  w^ould  also  have 
received  many  benefits — a  result  of  the  pros- 
perity of  the  town.  No  argument  is  neces- 
sary to  prove  this ;  its  truth  must  be  admitted 
by  the  thoughtful. 

The  town  and  community  would  prosper  so 
long  as  markets  could  be  found  for  their 
wares;  they  would  be  in  a  condition  to  manu- 


FREE  BANKING.  1 91 

facture  at  a  minimum  cost  so  long  as  the  raw 
material  could  be  produced  in  the  community 
as  cheaply  as  elsewhere,  and  so  long  as  there 
was  not  an  excessive  demand  for  labor  there. 
Labor  could  not  command  more  wages  than 
the  profits  from  the  sales  of  the  wares  would 
permit  the  manufacturers  to  pay.  There  is  a 
period  that  seems  inevitably  to  occur  in  every 
business  when  the  product  of  factories  can- 
not be  sold  at  a  profit,  because  in  the  markets 
are  offered,  at  a  price  that  will  not  return 
profits  to  the  manufacturers,  more  of  the 
goods  than  consumers  can  use. 

When  that  period  arrived,  the  manufac- 
turers of  Illustrateville  would  either  shut 
down  their  works  or  reduce  the  output,  by 
shortening  hours  of  work,  or  by  employing 
fewer  workers,  until  scarcity  of  their  wares  in 
the  market  would  raise  the  selling  price  to  a 
point  where  profits  would  be  returned  to 
them. 

This  they  could  readily  do.  The  bank  held 
their  obligations;  the  management  of  the  bank 
would  never  have  permitted  them  to  extend 
their  business  beyond  a  legitimate  risk.  The 
money  they  had  borrowed  was  the  credit  of 
the  bank.  The  bank  had  borrowed  no  money 
to  promote  those  industries;  no  capitalists,  no 
other  bank,  could  demand  of  the  Bank  of  Illus- 
trateville the  amount  of  money  that  that  bank 


192  FREE  BANKING. 

had  lent  to  those  manufacturers  of  the  town 
to  promote  the  industries  now  embarrassed 
for  the  lack  of  customers.  It  was  a  necessity 
of  the  bank  to  maintain  the  various  industries 
that  its  credit  had  promoted.  It  might  pos- 
sess the  power  to  close  some  of  them  out,  per- 
haps all  of  them,  but  it  could  not  be  to  its 
advantage  to  do  so;  it  would,  probably,  be  to 
its  disadvantage.  I'he  bank  could  make  profits 
only  by  lending  its  credit,  excepting  from  that 
little  that  could  be  made  by  lending  its  ex- 
cess deposits.  Unless,  indeed,  factories  were 
to  be  operated  in  the  future,  the  bank  could 
not  hope  to  find  a  future  market  for  its  credit. 

Should  the  bank  close  any  one  of  the  indus- 
tries it  had  promoted,  it  would  have  to  do  so 
because  the  management  of  that  industry  had 
failed,  in  some  way,  to  show  good  business 
qualities,  or,  in  the  minds  of  such  m«en  as  the 
banks  must  lend  its  credit  to,  it  would  impair 
faith  in  the  fairness  and  in  the  good  business 
qualifications  of  the  bank's  management. 
Without  this  faith  in  the  bank  no  man  of  such 
capabilities  as  the  bank  must  necessarily  use 
would  undertake  to  build  an  industry  pro- 
moted by  it. 

The  bank,  being  under  no  pressure  from 
without,  could  afiford  to  permit  all  of  these  in- 
dustries to  remain  idle.  Its  stock  cost  nothing; 
stockholders  would  simply  have  less  profits; 


FREE  BANKING.  193 

their  stock  would  be  unimpaired;  it  was  really 
only  a  part  of  their  farms  and  houses.  They 
could  be  put  to  only  a  slight  cost  even  if  the 
bank  remained  in  idleness,  together  with 
the  factories;  for  the  expense  of  maintaining 
the  bank  would  be  light.  The  money  that  the 
bank  had  borrowed,  if  any,  upon  which  inter- 
est was  being  paid,  could  readily  be  returned 
or  lent  elsewhere,  to  produce  interest  with 
which  to  pay  interest.  The  currency  of  the 
community  would  be  bank  bills  of  Illustrate- 
ville,  so  long  as  the  people  of  the  community 
had  faith  in  the  integrity  of  the  bank,  and 
those  bills  would  reach  the  bank  only  to 
pay  an  indebtedness  to  the  bank  or  as  a  de- 
posit. If  each  man  in  the  community  had  in 
his  possession  ten  dollars  of  these  bills,  there 
would  be  not  over  twenty  or  twenty-five  thou- 
sand dollars  of  them  out.  The  merchants  of 
the  community  might  have  as  much  more 
again  on  deposit  in  the  bank.  All  of  these 
bills — those  in  circulation  and  those  in  the 
bank — might  be  interest-earning  to  the  bank, 
but  the  bank's  liabilities  for  i*-  circulating 
notes  would  not  be  one-tenth  of  its  real  assets. 
Every  obligation  of  the  bank  would  be  repre- 
sented by  its  circulating  notes  and  its  de- 
posits. It  would  rarely  lend  anything  but  its 
credit — as  represented  by  these  notes — to 
those  to  whom  it  extended  a  credit.     It  never 


194  FREE  BANKING. 

borrowed.  For  all  the  notes  it  issued,  or  lent, 
it  received  pledges  of  security  that  they,  or 
legal-tender  money,  would  be  returned  to  the 
bank  in  liquidation  of  the  lo'-n. 

The  bank  managers  would  not  consent  to 
have  manufactured  products  sold  at  ruinous 
prices  to  provide  the  manufacturer  with  means 
to  pay  his  obligations  to  the  bank.  Nor 
would  they  consent  to  excessive  or  speculative 
productions.  To  do  so  would  not  be  good 
business.  If  a  manufacturer  were  in  posses- 
sion of  sufficient  wealth  to  do  this  without  the 
bank's  aid,  then  the  bank  would  have  no 
further  use  of  him;  and  his  failure,  therefore, 
could  not  affect  the  bank.  If  he  persisted  in 
manufacturing  with  his  own  means,  or  means 
borrowed  from  outside  capitalists,  the  bank 
would  not  lose  anything  from  a  disaster  that 
might  overtake  him,  and  Illustrateville  would 
be  benefited  to  the  extent  to  which  outside 
capital  may  have  been  absorbed  by  the  town 
in  such  unprofitable  productions,  less  such 
interest  that  may  have  been  paid  for  the  use 
of  that  outside  capital. 

It  will  be  seen,  then,  that  it  is  possible  to 
have  a  bank  of  issue  that  will  provide  a 
medium  of  exchange ;  that  will  enable  hitherto 
idle  labor  to  manipulate  nature's  products  into 
useful  commodities,  without  that  bank  having 
any    capital    other    than    real    estate.      This, 


FREE  BANKING.  195 

of  course,  any  community  of  civilization  can 
furnish.  It  has  been  shown  that,  in  the  com- 
munity in  which  the  bank  is  situated,  and  for 
the  convenience  of  which  it  was  estabHshed, 
such  a  bank  can  provide  a  currency  equal  in 
value  to  the  best  currency  of  the  world,  but  of 
so  little  value  elsewhere  that  it  will  not  be  re- 
ceived as  money  by  anyone  who  does  not 
intend  to  use  it  in  the  vicinity  of  the  bank 
that  issued  it.  And  no  one  excepting  the 
management  of  the  bank,  and  then  only  at  the 
office  of  the  bank,  is  compelled  to  accept  it. 

The  history  of  lUustrateville  demonstrates 
that  such  a  currency  can  practically  produce 
wealth  from  that  which  is  more  worthless  for 
the  time  being  than  nothing — useless  natural 
products  and  idle  labor;  that  it  can  stimu- 
late industries  to  a  point  the  commercial  world 
is  pleased  to  term  overproduction,  and  can 
then  in  safety  stop  the  business  of  production 
until  a  scarcity  of  products  in  communities 
creates  wants  that  will  return  profits,  and  dur- 
ing the  period  of  waiting  nothing  of  past 
labor's  productions  is  sacrificed.  It  has  been 
demonstrated  also  that  under  that  system,  the 
condition  of  labor  has  been  so  advantageous 
that  only  the  most  wretched  recklessness,  due 
to  accumulated  rewards,  could  have  prevented 
the  employee  from  awaiting  the  coming 
of  the  revived  business.     It  has  been  shown, 


196  FREE  BANKING, 

too,  that  during  the  period  of  manufacturing 
activity,  under  the  system  described,  the 
accumulation;  of  wealth  have  been  reserved 
for  the  people  of  the  communities  that  created 
it,  and  distributed  it,  as  fairly  as  under  any 
system  of  economy  yet  devised. 

It  has  also  been  shown  that,  under  the 
system  of  money  now  prevalent  in  the  world, 
and  particularly  in  the  United  States,  the 
profit  realized  for  most  of  the  industries  de- 
veloped in  the  country  districts, — more  espe- 
cially those  remote  from  great  centers, — have 
been  taken  from  the  communities  that  yielded 
them;  that  frequently  more  than  profits  have 
been  absorbed  by  other  communities;  that  the 
accumulation  of  those  instrumental  in  organ- 
izing, in  a  limited  way,  small  industries,  have 
gone  to  those  who  aided  them  with  capital  to 
extend  their  plant,  and  that  when  the  period 
of  *'  overproduction "  and  stringent  money 
market  came  the  industries  have  frequently 
been  crushed  out,  the  community  impover- 
ished, and  the  people  demoralized.  But  the 
great  centers  have  grown  in  extent  of  terri- 
tory, of  magnificence,  rich  men,  poverty,  crime, 
and  degradation. 

When  the  Government  is  confined  to  its 
legitimate  functions,  completely  separated 
from  the  banking  business,  a  paper  currency, 
as  has  been  shown,  can  be  issued  that  will 


FREE  BANKING.  197 

afford  to  all  sections  of  our  country  a  safe  and 
elastic  bank  currency.  But  not  one  uniform 
and  under  Government  supervision,  and  where 
there  is  also  no  need  of  the  Government  to 
exert  itself  tO'  measure  the  volume  by  the 
needs  of  business. 

If  the  civilized  governments  will  confine 
their  monetary  laws  to  defining  the  quantity 
of  the  measuring  metal  the  unit  of  value 
must  contain,  and  permit  the  methods  of  ex- 
pediting exchange  of  commodities  to  be  ad- 
justed by  tradesmen's  business  necessities  and 
capabilities,  a  paper  substitute  for  money  will 
be  provided  that  will  be  as  effective  in  pro- 
moting exchanges  as  any  other  possible 
means.  Of  this  there  can  be  no  reasonable 
doubt. 

The  needs  of  business  will  do  its  own  meas- 
uring accurately,  while  the  Government's 
would  never  be  correct  unless  by  an  oc- 
casional accident.  It  would  be  a  paper  cur- 
rency, not  made  legal  tender  for  public  and 
private  debts,  but  as  good,  where  issued,  as 
the  best  money  of  the  world.  Under  a  per- 
fectly free  banking  system  the  volume  of 
currency  in  circulation  would  be  regulated 
entirely  by  the  demands  of  communities  for  it. 
Those  communities  that  might  at  one  sea- 
son of  the  year  demand  the  use  of  $150,000  of 
circulating   bills,   and   at   another   time   not 


198  FREE  BANKING. 

$50,000,  would  be  accommodated  with  cur- 
rency by  the  free  banks  according  to  the  com- 
munity's wants.  When  the  community  needed 
$150,000  of  the  currency  bills,  the  bank 
would  lend  its  credit  to  that  amount,  and 
from  the  loan  of  its  credit  make  the  same 
profits  that  it  could  have  made  from  the  loan 
of  $150,000  of  gold  coin.  But  as  gold  would 
have  been  capable  of  earning  interest  without 
the  bank's  credit  sustaining  it,  the  bank  would 
be  compelled  to  lose  whatever  interest  its  gold 
was  capable  of  earning  when  it  retained  the 
gold  in  its  vault,  or  whenever  it  was  unlent. 

Not  so  with  its  credit  bills.  If  the  interest 
on  loans  were  six  per  cent.,  as  long  as 
the  bank  could  lend  $150,000  of  currency 
notes,  it  made  from  the  loans  of  its  credit 
$750  per  month,  less  the  bank's  expense; — 
not  from  the  loan  of  accumulated  wealth. 
When  the  business  of  the  community  de- 
manded only  a  few  thousand  dollars'  worth 
of  currency  notes,  the  bank's  profits  would 
be  little  or  nothing.  But  why  should  the 
bank  derive  a  profit  from  its  business  with  a 
community  so  embarrassed  for  the  want  of 
consumers  of  its  wares  as  tO'  be  compelled 
to  resort  to  idleness  to  avoid  losing  the 
wealth  it  had  already  accumulated;  a  com- 
munity forced  to  idleness  that  economies 
essential   to  its   future   prosperity   might   be 


FREE  BANKING.  199 

accomplished?  Why  should  the  commodity 
of  money,  or  the  commodity  of  land — the 
bank's  capital — possess  a  privileg:  not  com- 
mon to  all  other  commodities? 

It  may  occur  to  some  minds  that  the  Bank 
of  Illustrateville  might,  at  some  period  in  its 
history,  when  it  had  issued  a  very  large 
amount  of  currency  notes,  be  embarrassed  by 
an  impairment  of  its  credit,  and  it  might  even 
have  the  greater  part  of  its  notes  offered  at 
its  counter  for  redemption  in  gold;  but  such 
a  condition  would  be  only  a  remote  possibility 
to  the  bank.  Should  outside  capitalists,  seek- 
ing to  injure  it,  be  willing  to  pay  dearly  for  the 
pleasure  of  doing  so,  it  might  cause  the  bank 
to  close  its  business  for  a  time;  but  so  long  as 
the  bank's  managers  possessed  the  confidence 
of  the  trading  public  of  their  town,  the  incon- 
venience to  the  business  of  the  bank  and  the 
community  would  be  but  for  a  short  time. 

The  bank  could  readily  realize  sufficient 
cash  on  its  valuable  holdings  of  real  estate 
and  other  collaterals,  which  it  had  taken  from 
every  man  to  whom  it  had  issued  a  note ;  and 
when  it  had  done  so,  its  notes  could  all  be 
paid.  It  then  would  not  owe  a  dollar.  The 
money  it  had  borrowed  to  redeem  its  notes 
would  have  been  repaid  from  the  collections 
of  the  debts  owed  to  the  bank,  which  would 
be  in  exactly  the  same  condition  to  do  busi- 


200  FREE  BAA' KING. 

ness  as  it  had  been  on  the  day  it  first  opened 
its  doors.  If  outside  capitaHsts  had  been  able 
to  command  one  hundred  thousand  dollars 
of  the  notes,  they  could  have  accumulated 
those  notes  only  by  slowly  purchasing  and 
by  holding  them.  The  Bank  of  Illustrate- 
ville  would  probably  be  making  interest  on 
these  notes  all  the  while  that  those  seeking- 
to  injure  the  bank  were  holding  them.  For 
those  notes  might  be  interest-making  so  long 
as  they  remained  outside  of  the  1)ank  that 
issued  them.  They  could  be  had  only  by 
purchase  at  their  full  face-value.  The  gold 
with  which  they  would  have  to  be  purchased 
would  go  to  those  in  Illustrateville  who  used 
the  bank's  circulating  notes,  and  in  the  usual 
course  of  business  would  naturally  go  into  the 
bank's  vaults  through  the  channel  of  bank 
deposits.  This  would  to  a  great  extent  fur- 
nish the  bank  with  gold  to  meet  any  demands 
made  upon  it  for  the  redemption  of  its  notes. 
The  managers  of  the  bank  would  know  when- 
ever such  an  efifort  to  secure  an  extraordinary 
amount  of  its  notes  was  being  made,  because 
the  needs  of  the  business  of  the  town  for  cur- 
rency notes  would  be  apparent  to  them,  and 
whenever  an  excessive  number  of  their  notes 
were  in  circulation  they  would  well  know  that 
an  unusual  and  senseless  movement  was  tak- 
ing place;  they  would  therefore  naturally  re- 


FREE  BANKING.  201 

serve  a  corresponding  amount  of  the  gold  that 
those  persons  who  were  hoarding  their  notes 
fooHshly  provided  the  bank  with. 

It  is  not  to  be  supposed  that  the  officers, 
whose  quahfications  and  integrity  had  inspired 
confidence  among  the  people  of  a  community 
to  accept  their  currency  notes  at  a  value  equal 
to  the  best  money  in  the  country,  would  lend 
those  notes  on  the  security  of  irresponsible 
people,  just  for  the  sake  of  getting  those  notes 
into  circulation.  The  bank  could  not  make 
anything  by  it.  It  is  quite  possible  that  if  they 
did  lend  their  notes  recklessly,  the  bank  would 
not  be  able  to  collect  a  dollar  from  those  irre- 
sponsible persons  to  whom  they  made  the 
loans.  It  would  rather  be  compelled  to  pay 
out  a  gold  dollar  for  each  dollar's  worth  of 
those  notes  that  it  had  lent  to  irresponsible 
persons.  The  managers  of  the  bank,  there- 
fore, would  be  just  as  particular  regarding  the 
responsibility  of  those  to  whom  they  lent  their 
credit  notes  as  they  would  if  they  had  had 
nothing  but  gold  money  to  lend. 

Irresponsible  men  could  not  organize  such 
banks.  As  it  has  already  been  said:  having 
no  credit,  they  could  not  sell  credit.  No  one 
would  take  their  notes.  They  could  not  cir- 
culate currency.  The  conditions  would  not 
be  those  that  existed  in  the  United  States  in 
i860,  when  there  was  no  paper  money  that 


202  FREE  BANKING, 

was  good  money  in  every  community  of  the 
entire  country,  and  when  the  conveniences  for 
the  use  of  gold  and  silver  were  not  nearly  so 
great  as  now,  and  when  there  was  almost  no 
clearing-house  system  for  the  banks  of  the 
country.  But  with  a  national  paper  money 
as  good  as  gold,  although  not  a  legal-tender 
money,  with  a  telegraphic  and  telephonic  sys- 
tem, that  practically  brings  in  twenty-four 
hours  at  the  most  any  bank  of  the  country  into 
communication  with  that  bank  that  is  furthest 
away  from  it,  there  can  be  no  such  confusion 
as  that  which  was  so  objectionable  in  the  old 
State  banks.  If  the  people  of  the  United 
States  will  not  accept  a  bank  bill  of  Canada, 
which  is  redeemable  in  the  United  States  gold 
dollar,  it  is  unreasonable  to  assume  that  the 
people  of  New  York  would  accept  a  bank  bill 
of  a  private  bank  of  Philadelphia,  or  even  of 
Newark,  N.  J.,  in  payment  of  a  debt  due  them, 
when  they  have  a  right  to  demand,  and  can 
readily  get,  money  that  would  be  perfectly 
acceptable  to  them.  To  a  creditor  no  bills 
would  be  acceptable  that  he  did  not  feel  con- 
fident could  be  exchanged  for  an  equal 
amount  of  the  best  money  in  use.  No  credi- 
tor would  take  money  of  any  kind  that  was 
not  so  good  as  the  standard  money. 

Banks,  as  a  matter  of  self-interest — under  a 
system  where  all  bank-note  currency  is  fur- 


FREE  BANKING.  203 

nisbed  by  free  banks — would,  as  speedily  as 
possible,  return  to  the  banks  that  issued 
them  the  notes  that  came  to  them  in  the  usual 
course  of  business.  The  notes  of  other  banks 
could  not  conveniently  nor  profitably  be  used 
by  the  bank  that  received  them,  hence  they, 
with  the  speediest  dispatch  possible,  would  be 
returned  to  the  bank  that  issued  them  for 
redemption.  They  would  be  treated  just  as 
checks  drawn  on  other  banks  are  now  treated, 
and  a  demand  for  payment  in  gold  would  at 
once  be  made  on  the  issuing  bank.  The 
reason  is  very  clear.  Banks,  under  a  free- 
banking  system,  can  make  more  profit  from 
lending  their  credit  in  the  shape  of  their 
currency  notes  than  from  any  other  loans 
they  can  make.  To  pay  out  to  depositors 
the  notes  of  other  banks  only  reduces  their 
own  opportunity  to  lend  their  own  notes,  for 
their  notes  are  lent  and  are  earning  interest 
whenever  in  the  hands  of  others  as  circulating 
notes.  If  other  notes  displace  theirs,  they  fail 
to  make  profits,  to  the  extent  that  such  circu- 
lation of  other  notes  or  money  prevents  their 
own  notes  from  earning  interest. 

A  few  words  shall  be  said  here  that  may 
lead  some  who  are  doubtless  prejudiced 
against  free  banking — because  of  their  recol- 
lection of  the  bank  notes  that  served  the 
United   States  with   currency  from    1832  to 


204  FREE  BANKING. 

1863 — to  a  more  careful  analysis  of  the  con- 
ditions of  the  people  of  the  agrarian  districts 
of  this  country  during  those  years. 

New  England  had  during  that  time  become 
a  great  cotton-manufacturing  community, 
rivaling  England  in  the  world's  market  for 
cotton  fabrics.  Pennsylvania  had  so  ad- 
vanced her  industries  in  iron  that  the  finished 
articles  of  her  industries  in  that  metal  were  to 
be  found  in  use  in  all  quarters  of  the  globe, 
and  American  railroad  engines  v^^ere  exten- 
sively used  in  Europe,  specially  in  Russia. 

American  clocks  were,  during  that  time, 
sold  in  all  parts  of  the  world,  even  in  Switzer- 
land to  a  very  great  extent.  American  ships 
carried  the  flag  of  the  American  commerce 
wherever  there  was  a  navigable  sea  or  a  chan- 
nel for  trade.  American  prosperity  invited 
the  best  blood  of  Europe  to  our  shores,  which 
aided  to  build  up  a  mighty  empire  west  of  the 
thirteen  original  States.  In  that  period  a 
cable  v/as  laid  across  the  Atlantic  Ocean  by 
American  enterprise,  uniting  us  in  closer  ties 
to  the  civilizations  of  Europe.  Thousands  of 
miles  of  railroads  were  built  and  operated, 
bringing  under  cultivation  millions  of  acres  of 
hitherto  unproductive  lands.  The  free-school 
system  could  be  found  in  every  community, 
and  together  with  the  church  extension  and 
the  development  of  the  printing  press,  the 


FREE  BANKING.  205 

young  of  the  land  were  thereby  taught  prin- 
ciples of  sobriety,  integrity,  and  industry. 
And  when  the  calamity  of  the  Civil  War  fell 
upon  the  land  it  disclosed  that  never  before  in 
the  history  of  the  world  had  a  people  been 
more  perfectly  instructed  in  those  cardinal 
virtues.  They  fought  battles  for  principle,  and 
not  because  of  hate.  And  when  the  war  ended, 
the  contending  forces  clasped  hands  across 
the  bloody  chasm,  and,  as  friendly  rivals,  be- 
gan a  new  contest  for  the  restoration  of  a 
common  country  tO'  prosperity  and  greatness ; 
a  contest  in  which  sword  and  cannon  gave 
place  tO'  a  geater  force, — sobriety,  integrity, 
and  industry  in  concert. 

Now  it  would  not  be  fair  to  assert  that  all 
the  greatness  and  prosperity  that  our  country 
enjoyed  during  the  period  when  banking  was 
comparatively  free  in  the  United  States,  was 
the  result  of  that  banking  system.  It  is  never- 
theless fair  to  contend  that  the  free-banking 
system  that  prevailed,  when  only  States  au- 
thorized those  banks  that  furnished  all  the 
paper  currency  in  use,  did  not  retard  the  prog- 
ress of  the  country;  that  the  system  did  not 
develop  poverty  and  crime;  did  not  lower  the 
standard  of  morals  and  education,  and  did  not 
oppress  any  community  of  the  country. 

It  is  true  that  some  unwise  men  and  women 
received  in   payment,   during  the   period   of 


2o6  FREE  BANKING. 

wild-cat  money,  some  bills  that  were  not 
worth  anything;  but  it  by  no  means  follows 
that  because  of  this  the  benefit  derived  from 
free  banking  was  not  far  more  than  com- 
pensation for  its  defects.  The  person  who 
pays  to  another  a  worthless  bill,  however 
innocent  of  an  intention  to  do  so,  is  not  re- 
lieved from  the  debt,  and  he  must  give  good 
money  for  the  worthless  money  before  the 
debt  can  be  liquidated.  To  make  laws  to  pre- 
vent men  from  being  swindled  has  never  been 
successfully  accomplished.  To  make  laws  to 
punish  swindlers  is  an  easy  task. 

There  seems  always  to  have  been  a  large 
class  of  people  who  have  shown  great  in- 
genuity in  discovering  new  ways  to  be  swin- 
dled. The  swindlers  of  the  world  are  not  half 
so  prolific  in  inventing  new  schemes  of  swin- 
dling as  these  who  seem  desirous  of  being 
swindled  are  in  arriving  at  the  means  by  which 
they  can  enjoy  that  sensation.  To  incon- 
venience one  hundred  men  in  order  to  pre- 
vent one  from  being  imposed  upon,  is  not 
good  ethics.  There  are  those  who  will  never 
learn  from  the  wisdom  of  others,  but  will  in- 
vestigate for  themselves.  The  bunco  steerer 
is  perhaps,  all  things  considered,  a  useful 
teacher  of  many  who  were  once  his  victims. 
It  is  even  possible  that  he  has  taught  so  many 
useful  lessons  that  he  has  benefited  more  than 


FREE  BANKING.  207 

injured  society.  His  victims  needed  more 
thorough  instruction  than  pubhc  schools  and 
books  and  newspapers  could  give  them;  and 
they  needed  that  instruction  badly. 

A  people  who  acknowledge  themselves  to 
be  so  stupid  that  they  fear  to  trust  them- 
selves to  determine  the  value  of  a  currency 
note,  but  demand  that  a  good,  attentive  pater- 
nal Government  shall  do  it  for  them,  need 
possibly  the  bunco  steerer  as  a  teacher  before 
they  can  be  put  into  possession  of  enough  in- 
telligence to  enable  them  to  produce  their  own 
sustenance.  And  a  people  who  demand  that 
laws  be  passed  to  make  them  good,  will  prob- 
ably steadily  degenerate.  Persons  who  assert 
that  they  themselves  are  perfectly  good,  but 
demand  laws  to  be  enacted  to  compel  others 
to  do  right,  need  watching  to  keep  them  out 
of  lunatic  asylums  or  out  of  prisons. 

The  natural  man  is  too  independent  and 
self-reliant  to  listen  willingly  to  the  command 
**  thou  shalt  not,"  while  the  admonition 
"  thou  shouldst  not "  appeals  to  his  reason. 
He  can  be  persuaded  more  readily  than  driven. 
The  man  that  must  be  driven  to  do  a  generous 
deed  can  never  do  it  without  feeling  a  degree 
of  resentment,  which  is  most  likely  to  result 
in  his  doing  a  most  ungenerous  deed  to 
compensate  him  for  what  he  believed  he 
had  lost. 


208  FREE   BANKING. 

Police  laws  should  be  made  with  the  sole 
view  of  punishing  criminals.  It  is  almost  a 
waste  of  time,  thought,  and  material  to  formu- 
late them  to  prevent  men  from  committing 
crime.  Education  must  do  that.  It  is  also  a 
waste  of  time,  thought,  and  energy  to  formu- 
late laws  to  prevent  foolish  people  from  buy- 
ing worthless  commodities.  Education  alone 
can  do  that.  As  certainly  as  the  threat  of 
eternal  punishment  does  not  prevent  those 
who  believe  in  such  punishment  from  break- 
ing all  of  the  Decalogue,  nor  that  of  death 
prevent  murder,  so  certain  is  it  that  no  threat- 
ened punishment  will  prevent  foolish  bargain 
hunters  from  purchasing  useless  and  worth- 
less commodities. 

Paternalism  in  government  has  always 
retarded  progress,  and  so  long  as  it  exists 
it  will  continue  to  do_sO';  to  debase  man's 
mental  forces,  enlarge  immorality,  and  in- 
crease poverty  and  crime.  Wherever  those 
conditions  exist  in  Christian  lands,  where 
good  strong  locks  or  guards  are  required  to 
keep  the  public  from  stealing  the  church 
Bible,  there  will  probably  be  found  a  good 
strong  paternal  government. 

There  are  a  thousand  and  one  good  reasons 
why  the  Government  should  keep  its  hands 
off  the  banking  business,  and  permit  the 
people  to  manage  their  own  affairs.     There  is 


FREE  BANKING.  209 

not  one  good  reason  why  it  should  conduct 
a  banking  business  or  seek  to  control  those 
who  do. 

There  is,  very  generally,  among  business 
men  and  bankers,  an  objection  to  using  real 
estate  as  security  for  currency  circulation. 
But  why  should  there  be?  There  is  doubly 
as  much  paper  money  in  use  in  the  world  as 
there  is  gold  with  which  to  redeem  it,  and  the 
gold  is  in  such  shape  and  under  such  control 
that  it  is  quite  probable  that,  if  the  entire 
world  could,  at  the  same  time,  be  affected  by 
such  a  scare  as  that  given  to  the  business  men 
of  the  United  States  in  October  of  last  year, 
two-thirds  of  the  gold  would  get  into  hands 
that  would  not  permit  it  to  be  used  in  redeem- 
ing currency  notes.  The  men  who  control 
the  vast  gold  holdings  of  our  country,  of  Eng- 
land, of  France,  of  Germany,  of  Austria,  and 
of  Russia  would  stop  paying  gold  when  it 
should  become  apparent  to  them  that  a  de- 
mand for  the  redemption  in  gold  of  the  paper 
money  in  circulation  would  exhaust  all  their 
stores  of  gold,  and  still  leave  much  paper 
money,  representing  millions  of  dollars  of 
value,  unpaid.  And  if  it  were  necessary  to 
conserve  the  interest  of  the  large  holders  of 
gold  early  in  the  movement,  means  would  be 
found  to  stop  the  redemption  of  the  notes.  It 
is  not  at  all  improbable  that  the  very  gold 


210  FREE  BANKING. 

pledged  to  redeem  the  paper  money  might 
frequently  be  used  to  buy  the  discredited 
money;  that  profits  also  might  be  realized, 
just  as  the  gold  reserved  by  State  banks  in 
1863  was  used  by  those  banks  to  buy  legal- 
tender  Government  money  at  a  discount,  with 
which  to  redeem  their  own  notes. 

At  the  close  of  the  last  century,  the 
banks  of  England  were  permitted  to  suspend 
specie  paymient  for  nearly  twenty  years,  the 
gold  of  the  banks  being  used  for  purposes 
other  than  to  redeem  notes  with.  Govern- 
ments have  always  shown  a  remarkable 
promptness  in  aiding  the  owners  of  gold 
and  silver  to  avoid  fulfillments  of  contracts 
that  are  likely  to  deprive  them  of  their 
specie,  and  the  reason  for  so  doing  is  readily 
apparent.  Most  of  the  governments  of  the 
world  that  afford  us  any  knowledge  of  their 
monetary  system  have  been  monarchies,  or 
governments  of  a  privileged  class,  and  such 
governments  owe  much  of  their  existence  to 
those  who  possess  the  money  of  the  country, 
and  it  is  but  natural  that  the  rulers  should  at- 
tend closely  to  the  personal  interests  of  those 
upon  whom  they  depend  so  much  to  continue 
as  rulers. 

Real  estate,  pledged  for  the  payment  of  a 
specific  debt,  cannot  so  readily  escape  the  bur- 
den placed  upon  it  as  long  as  those  obliga- 


FREE  BANKING.  21 1 

tions,  in  the  shape  of  currency  notes,  rested 
against  a  bank  the  capital  of  which  was  real 
estate.  If  mortgaged  for  that  specific  pur- 
pose, the  payment  of  those  notes  would  be 
assured  if  the  value  of  the  real  estate  mort- 
gaged was  sufficient  to  realize  the  value  of  the 
circulating  notes.  The  facts  in  regard  to  the 
volume  of  notes  issued,  and  to  the  value  of  the 
real  estate  pledged,  would  be  best  known  to 
those  people  living  in  close  contact  with  the 
bank.  Because  of  their  faith  in  the  ability  of 
the  bank  to  meet  its  notes  on  demand,  they 
would  readily  be  accepted  as  money  when 
issued.  And  because  such  a  faith  can  be  sus- 
tained only  by  a  knowledge  of  the  facts,  and, 
as  those  people  living  remote  from  the  bank 
would  not  possess  those  facts,  such  notes 
Avould  not  be  accepted  by  them  as  money. 

Thieves  may  rob  a  bank  of  its  gold  reserve, 
and  wreck  it.  Banks  have  been  robbed  of 
millions  of  their  money  and  securities.  The 
bank  whose  capital  is  mortgages  on  real 
estate  cannot  be  robbed  of  its  capital,  and 
thieves  have  no  use  for  unissued  bills  of  a 
bank;  they  can  scarcely  use  them  as  money 
without  being  detected  in  the  crime  of  rob- 
bery. 

It  may  be  urged  that  such  banks  as  that  of 
Illustrateville  are  better  suited  to  promote  the 
industries  of  small  communities  than  of  great 


212  FREE  BANKING. 

cities.  That  is  true;  and  that  is  their  real 
merit;  but  they  do  no  injustice  to  the  great 
cities.  Strong  financial  communities,  like 
great  cities,  can  readily  take  care  of  them- 
selves. They  need  no  outside  help,  but  they 
should  never  be  permitted  to  put  to  an  un- 
just cost  outside  communities.  Injustice  to 
themselves  they  can  stand,  and  even  be  strong, 
but  they  nevertheless  should  not  be  sub- 
mitted to  such  injustice. 

They  can  have  their  own  strong  confedera- 
tion of  banks,  the  capital  of  which  may  be 
gold.  Government  and  other  such  securities, 
or  real  estate;  and  they  may  have  paper  cur- 
rency, common  to  all,  or  to  individual  banks. 
There  would  be  no  difficulty  whatever  in 
operating  such  banks  in  large  cities.  But  it  is 
for  the  people  of  those  cities  to  say  how  they 
shall  do  business  that  does  injustice  to  none. 
And  to  interfere  with  them  is  not  the  business 
of  the  Government. 


THE    END. 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 

Renew^lfrnhfiJiSe  subject  to  immediate  recall. 

(ft  StAUKS 

MAR  2 1 1961 

REC'D  »-'^ 

m  1  S  "iS^' 

l":Dec'64S8 

rcfcC  D  LD 

DEC  2  n '64-]  P 

M 

^B  ia!53 


/pi  I  vvo 


v-tU 


1 08050 

.275 


